Warren Buffett bashes gold, says the 'magical metal was no match for the American mettle'

Bill Pugliano/GettyWarren Buffett
  • Warren Buffett isn’t a fan of gold.
  • In his annual letter out Saturday, Buffett gave an example showing why stocks are a better investment than gold over the long run.
  • This wasn’t the first time that Buffett has bashed the precious metal.

It’s no secret that Warren Buffett doesn’t like gold as an investment.

The legendary investor used an example in his 2018 letter to drive home his point about the importance of not panicking and investing in stocks over gold for the long run.

Buffett highlighted the 40,000% surge in the US’s national debt over the last 77 years, and said if you “panicked at the prospects of runaway deficits and a worthless currency” and bought 3.25 ounces of gold with your $US114.75 (the amount Buffett invested when he purchased his first shares of stock in 1942) it would be worth about $US4,200, or “less than 1% of what would have been realised from a simple unmanaged investment in American business.”

He added: “The magical metal was no match for the American mettle.”

Over the years, Buffet has taken his fair share of swipes at the precious metal.

At Berkshire’s 2018 annual meeting, Buffett compared $US10,000 invested in stocks and gold in 1942 (the first year he invested in stocks). That money invested in an S&P 500 index fund (there were none at the time, he noted) would have been worth $US51 million in 2018 while a gold investment would have been worth only $US400,000.

“In other words, for every dollar you could have made in American business, you’d have less than a penny of gain by buying into a store of value which people tell you to run to every time you get scared by the headlines,” he said.

And in his 2011 letter, Buffett noted that for $US9.6 trillion you could buy “pile a” – all of the gold in the world, or “pile b” – the entire US cropland (400 million acres) plus 16 ExxonMobils and still have another $US1 trillion left over.

“Admittedly, when people a century from now are fearful, it’s likely many will still rush to gold,” he wrote. “I’m confident, however, that the $US9.6 trillion current valuation of pile A will compound over the century at a rate far inferior to that achieved by pile B.”

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