Buffett on Gold

Warren Buffett, business investor extraordinare, says that gold is a bad place to stick your money.   His argument is largely that gold does nothing when held as an investment; it’s not a productive business who adds value through activity and improvement.

Now, as with any investment advice, keep in mind that Buffett has different goals than gold investors.   Certainly, gold has proven to be quite profitable to those who invested in it during the 70s, after the gold standard was removed in the U.S., and that’s a valid way to hold on to your money.  In fact, part of Buffett’s argument about gold investors being loud is that those people view their investment as being a bit more respectable than the wild gambling of the stock market, or the hack-and-slash investment of corporate raiding.    There’s something regal, sovreign about owning gold, and I can’t fault people for taking that route.

The key to gold investment, though, is something the link above points out:  The price of gold is quite high, and people want you to start buying gold.   When the people who own the gold are trying to cash out on their investment, it might not be the best time to start investing, at least not in the long term.  The price of gold may have doubled in the past five years, but it’s down 10% in the past six months.   Whether you’re Buffett or a daytrader or a casual investor, that’s what you need to look at — and, as Buffett said, there’s nothing inherent in gold to improve its value, so keep an eye out for the objective of the investment.   Just because it’s gold doesn’t mean it’s necessarily the right way to go.