First time in history: Even Warren Buffet bets on Gold (1)
Warren Buffett, the legendary American investor who had long held the title of the richest person in the world (currently holding the 7th position in the table of the rich), took an unprecedented step and bought shares of a gold mining company for the first time in history. The position acquired through iconic asset management company Berkshire Hathaway in the Canadian gold mining company Barrick Gold is worth $ 563 million, currently accounting for 0.3% of Berkshire’s total equity portfolio of 44 companies.
Historically, Buffett has probably the most famous gold skeptic in the world. It is important to note that in parallel with the acquisition of gold mines, Buffett gave up a large part of the shares in America’s largest commercial banks. Simultaneously with its investment in gold mines, Buffett sold 26% and an incredible 61% of its holdings in the largest US banks, Wells Fargo and JP Morgan Chase. As a result of this step, the share of banks in the Berkshire Hathaway portfolio decreased from 5.3% to 3% and from 3% to 1%, respectively.
Analysts attribute the sale of major banks’ shares to Buffett’s desire to minimize the risks to the financial sector from the global economic crisis caused by the coronary stagnation.
The ’Oracle of Omaha’ is a major institutional owner of Apple stock, which you could call the poster child for Warren Buffett stocks due to its strong earnings, returns, and management. Buffett´s company Berkshire Hataway maintained Apple position, which was acquired in 2016. Berkshire also kept a smaller stake in Amazon.com (AMZN) steady in Q2.
In the second quarter of this year, Berkshire exited Goldman Sachs (GS) and Delta Air Lines (DAL), as the coronavirus upended financial markets and air travel. It also cut a big position in Wells Fargo (WFC) by more than a fourth.
Berkshire also bought Barrick Gold (GOLD) for the first time last quarter. The company bought 20.92 Million shares of Gold Mining Stock Barrick Gold. The value of these shares is almost 564 Million Dollars.
In recent years Berkshire Hataway has also ditched IBM and General Electric. Barrick gold is the second-largest stock holding(2) for Berkshire Hathway at 564 million USD.
Historically, Buffet had been pessimistic about gold and the change of heart reflects the state of the economy as well as the risks of inflation due to excessive money printing, among other reasons.
Gold has increased by more than 20% in SEK terms as shown below. Gold price at the beginning of the year was about 459 SEK/gram and is currently (at the time of writing on 20200915) 555.16 SEK/gram.
Silver has increased by more than 40% in SEK terms as shown below. Silver price at the beginning of the year was about 168 SEK/ounce and is currently (at the time of writing on 20200915) at 241,15 SEK/gram. Thus the price of Silver YTD (year to date) for 2020 has increased by more than 43% in Swedish Crown (SEK) terms.
Mr.Buffett is one of the leading investors in the World and his amazing returns, year after year. are the direct indicator of that. Buffett is a buy-and-hold kind of investor, which means he believes in higher prices for gold. Historically, in times of economic uncertainty, gold has served as a good hedge to protect savings and retain purchasing power.
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Disclaimer: This article is for informational purposes only and is not intended as an investment analysis or recommendation to sell or buy commodities. Tavex is not responsible for any decisions made based on this information. Investing is associated with opportunities and risks, and the market value of commodities can both increase and decrease. Past or future yields on the commodities and financial ratios shown above do not represent a promise or an indication of future earnings.
(2) Warrens portfolio