Warren Buffett' Views on Gold: "Gold Speculative Instrument"

Many people always wanted to know about the legendary world investors or investment saint, as he is also known, Warren Buffett’s views on gold.

Warren Buffet on gold: Recently Warren Buffett has given some controversial views on gold. Buffett, in his latest remarks, has said gold is inferior to stocks and bonds and more of a speculative item than investment instrument.

In his annual letter to Berkshire Hathaway shareholders, published Feb. 25, Buffett states:

“Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce — gold’s price as I write this — its value would be about $9.6 trillion. Call this cube pile A.

“Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?”

We always have maintained our view that gold and the whole liquid commodity class has become an investible asset class but should not represent more than 20-30% of your portfolio that too not just gold, but the combination of major commodity basket, may be a diversified commodity fund or RICI or Rogers International Commodity Index.

Gold should not replace equity and bonds or to be invested in full, as propagated by many pro-gold advocates. 

Warren Buffett's remarks should be taken in this context and lights of broader and comprehensive understanding and not merely as anti-gold or pro-equity porponent as many analyst are doing.