CONTEXT

Warren Buffett has consistently avoided gold investments, viewing it as a non-productive asset that does not align with his value investing strategy. He prefers assets that generate income, such as stocks of companies like Coca-Cola or ExxonMobil.

In his 2011 letter to Berkshire Hathaway shareholders, Buffett described gold as having “two significant shortcomings”: it is neither useful nor procreative. He argued that owning gold relies on the hope that someone else will pay more for it in the future, without it generating value during ownership.

Buffett famously stated, “Gold is a way of going long on fear,” suggesting that gold’s value rises during economic uncertainty when investors seek safe-haven assets, but it lacks intrinsic productivity. He contrasted gold with productive assets like farmland or businesses, which generate ongoing returns.

In Q2 2020, Berkshire Hathaway surprised markets by investing $560 million in Barrick Gold (a gold mining company), acquiring about 21 million shares. This led to speculation that Buffett had softened his stance on gold. However, Berkshire exited this position within two quarters, capitalizing on gold’s price surge during the COVID-19 crisis. 

Why Buffett Avoids Gold?

1. Lack of Utility: Buffett views gold as unproductive, as it does not generate dividends, interest, or operational value, unlike stocks or real estate.
2. Speculative Nature: Gold’s value depends on future buyer demand rather than intrinsic growth, which conflicts with Buffett’s focus on long-term value creation.
3. Preference for Productive Assets: Buffett prefers investments like farmland or companies that produce tangible goods and services, offering compounding returns over time.
4. Historical Critique: In 2011, Buffett calculated that all the world’s gold (worth $7 trillion at the time) could be swapped for 1 billion acres of US farmland plus seven ExxonMobils, emphasizing gold’s limited economic utility.

But how has been Gold’s Market Performance?

1. Gold prices have surged, reaching an all-time high of ₹9426 per grams in 2025, driven by geopolitical tensions, trade wars (e.g., Trump’s tariffs), and a weaker US dollar. 
2. Gold has given 71.5% return in 2025, outperforming the S&P 500, which fell 20% from recent highs.
3. Historically, gold has performed well during market turmoil e.g., 39% gain during the 2008 financial crisis, 32% during the 2020 pandemic.

Contrasting Views

Critics like Frank Holmes (U.S. Global Investors) argue Buffett underestimates gold’s role as a safe-haven asset. Since 2000, gold has outperformed the S&P 500 by a 2:1 ratio and even Berkshire Hathaway, suggesting its value in crises.
Analysts from J.P. Morgan predict gold could reach ₹11,479 per gram by 2026, citing its hedge against inflation and economic uncertainty, contrasting with Buffett’s skepticism.

Implications for Investors

For investors following Buffett’s approach, focusing on productive assets like equities or real estate may offer better long-term returns, especially in stable economic conditions.
However, gold’s strong performance in 2025 and its historical resilience during crises (e.g., 2008, 2020) make it appealing for those prioritizing portfolio diversification or protection against economic downturns.