Gold is GOOD for NOTHING!
Warren Buffett never invested in Gold, yet he is one of the
greatest investors of our generation. He hates to invest in shiny metal. Just
take a look at a speech given by Buffett at Harvard in 1998 when he said of
gold:
"(It) gets dug out of the ground in Africa or
someplace. Then we melt it down, dig another hole, bury it again and pay people
to stand around guarding it. It has no utility. Anyone watching from Mars would
be scratching their head."
Buffett just doesn't get what all the fuss is about when it
comes to gold. The way he sees it, the value of gold is nothing more than our
stubborn willingness to protect its value.
However, that's not the worst part of gold in Buffett's
view. His biggest issue is the fact that gold is just of no value. Not in the
value someone is willing to pay for an ounce of it, but in its ability to
create wealth. In Buffett's opinion, gold is lazy and has no place in an
investor's portfolio. Gold can never create WEALTH.
Buffett hammered on gold in his 2011 shareholder letter
calling it an "unproductive asset." He said that assets like gold
"will never produce anything, but are purchased in the buyer's hope that
someone else will pay more for them in the future." He went on to say that
the owners of assets like gold "are not inspired by what the asset itself
can produce -- it will remain lifeless forever -- but by the belief that others
will desire it even more avidly in the future."
The problem with gold is that it has two major
insurmountable shortcomings. It is "neither of much use nor
procreative" according to Buffett. While he does allow for the caveat that
gold has some small industrial and decorative use, the demand for either
purpose is insufficient to use up all of the gold we are digging out of the
ground just to hide it away again is a bank vault. However, his bigger issue
with gold is that it can't be used to produce anything of value. Its value
rises and falls based on what someone else is willing to pay for it, not based
on its ability to generate income for its owner.
