Gold has risen to new record highs in pounds and euros as concerns about contagion in the eurozone and stagflation in the UK deepen. The euro has fallen sharply in international markets and is down 1.5% against gold so far this morning. European Council President Herman Van Rompuy has called an emergency meeting of top officials dealing with the euro zone debt crisis as concerns deepen over the sovereign debt crisis spreading to Spain and Italy.
Gold in USD and Berkshire Hathaway A Class Shares in USD – January, 2000 until July 2010 (Daily – Rebased to 1)
Gold has risen to record nominal highs at EUR 1,100/oz, GBP 971/oz and at $1,549/oz is only a few dollars or some 0.5% from the record high close of $1,556.70 seen on April 29th. The very poor U.S. employment numbers Friday suggest that the very tentative U.S. recovery is tottering and a recession looks very likely which is leading to safe haven demand.
Gold has had another period of correction and consolidation and is looking well positioned to eke out further gains as we move into the seasonal strong Autumnal period which begins in August.
Cross Currency Table
Spain’s 10-year yield spread over Germany widened to a euro-era record of over 300 basis points. Italian and Portuguese bonds are also under pressure with Portuguese 10 year yields surging to 13.4%.
The risk of contagion affecting European and international banks and a new banking crisis rises by the day.
Meanwhile, in the U.S., President Obama is seeking a massive $4 trillion in a deficit reduction package. Failure to do so may lead to a U.S. and global sovereign debt crisis.
Jim Cramer Critiques Warren Buffett Over Anti Gold Bias
Jim Cramer, the host of “Mad Money” has critiqued the Sage of Omaha, Warren Buffett, and his anti gold bias. Buffett has said that gold isn’t a sound long term investment because the precious metal has no ‘utility’.
Cramer says that he has heard from people saying they will not invest in gold since it was $700 per ounce because they “missed it” or because “someone like a Warren Buffett has said how valueless or silly it is”.
(GoldCore Editors note: George Soros cryptic comments about gold are similarly used by so called financial experts to dissuade people from owning gold)
“No one goes to Warren Buffett and says how have you done versus gold in the last 10 years. That is verboten. You are not allowed to ask him that.”
Cramer said that this “makes it very difficult to make headway with people” about owning gold.
While Buffett snubs the value of gold, Cramer emphasises the limited amount of gold bullion available and gold’s rarity (see GoldNomics video), as well as the lack of new gold being mined. Cramer says that there is far less gold than there is Berkshire Hathaway B shares and that Buffett can just print the shares.
“Against all that is a grey beard investor who has already made a lot of money, who frankly could have his money devalued and still have a lot and I feel like … you know what Warren … give other people a chance to make some money here ok.”
“Give other people a chance to protect their assets, give people a chance to buy insurance.”
“I would rather buy the insurance policy of gold than the insurance policy of Geico … pretty simple.” (to laughter)
“It is such a shame that he (Buffett) does that, I mean all he has to do is say that I don’t really understand it. “
“He did with Tech, like I saw when Intel was the equivalent of $2 and Microsoft was … before the big run. I understood … listen he said ‘I don’t understand tech’. That’s fine.”
He should say “I don’t understand gold”. He shouldn’t pick Keynes, who of course got the gold market wrong repeatedly. He should just actually say “I don’t understand it.”
“He would does us all … he is doing everyone a disservice by saying that it’s a beauty contest.”
Cramer is a divisive figure and liked and loathed by investors but these are excellent points about Buffett’s and Munger’s anti gold bias – points we have made previously.
Cramer’s assessment of Buffett and his lack of appreciation of gold as financial insurance and bias against gold is an accurate assessment.
Buffett deserves the title ‘Sage of Omaha’ and is to be respected but his failure to appreciate gold’s importance as a diversification in a portfolio and his repeated negativity towards gold (in contrast to his father Howard Buffett), will not be judged kindly in history.
It is never too late to do the right thing and to ensure his legacy Buffett should acknowledge gold has intrinsic value, has utility as money, as monetary asset, a finite currency and as financial insurance in a portfolio.
Cramer’s interview is a must watch and it can be watched on the GoldCore YouTube Channel.