After gold hit its highest price on record in the past few days, it was another piece of news that stunned everyone. Warren Buffett buys gold for the first time.
Buffett, an 89-year-old American investor who became multi-billionaire thanks to extremely brilliant and often even counter-current investment choices, in recent days through his company Berkshire Hathaway has bet over 605 million dollars in favor of gold. The curious thing is that in the past he repeatedly considered the yellow metal a useless investment. Now the world of stocks is shaking as the gold rush – especially after this extraordinary event – continues unabated.
Warren Buffett buys gold and sells US bank stocks
Warren Buffett buys gold and it’s not hard to see why. He sold tons of shares of American banks to buy those of Barrick Gold, a Canadian mining company whose prices follow the exact trend of the price of gold.
The Coronavirus has caused very serious damage to economies, causing extreme uncertainty among investors.
Warren Buffett didn’t think too much about it and liquidated many shares of US banks and financial companies at lightning speed. Just to name a few, his company Berkshire Hathaway reduced its Wells Fargo shares from 7.9% to 5.8% and those of JP Morgan from 1.9% to 0.7%. Reset those instead of Goldman Sachs as early as last May.
Berkshire Hathaway has also turned around for the US aviation industry. There was no lack of criticism from the most patriotic accusing the Oracle of betting against America.
It is clear that Warren Buffett has decided to invest a considerable sum in a safe haven asset, which in times of great uncertainty shows off its best performances.
Certainly it’s funny how an investor as anti-gold as Buffet now suddenly changes his mind. The Oracle of Omaha repeatedly argued in the past that gold is an asset just like tulips were in the 17th century, that is, not useful.
Only fools never change their minds.
What to expect from gold
Certainly the purchase of stakes in gold companies by the financial giant of Warren Buffett is symbolic and should not go unnoticed in the eyes of retail investors.
Looking a little deeper, many people fear further declines in US yields and a further rise in the rate of inflation, which are still bringing more and more capital into the yellow metal.
But a truly crucial role for the fate of the markets and gold will be played by the emergency of the Coronavirus. New deaths, new infections and therefore new harsh restrictions – in the States as well as in Europe – would force central banks around the world to provide further aid of billions of dollars, with all the resulting difficulties. The system may not hold up.
Net of these fears, emulating a Warren Buffett-style move is certainly not a bad idea.