Warren Buffett has a reputation for hating gold as an investment so when Berkshire Hathaway bought a new stake in one of the world’s most valuable mining firms and dumped Goldman Sachs, it was just one more way in which 2020 got stranger.
Shares of Canada-based mining company Barrick rose almost 12 percent Monday on the news. Rival miners Newmont, AngloGold Ashanti and Yamana all rose sharply as well, CNN reported.
Gold has surged almost 30 percent this year, benefiting from the weakness in the dollar. Wall Street perceives it as a safe haven bet during the covid-19 pandemic. Prices for gold topped $2,000 an ounce earlier this month before pulling back.
The fiat currency system may not survive the next recession, investment guru Peter Schiff has predicted. Schiff said he believes technology will enable the return of gold as a globally accepted form of currency.
Schiff said he believes the imminent demise of the U.S. dollar as a global currency is due to U.S. “fiscal profligacy” that has pushed the budget and trade deficit beyond the limits, leaving the dollar at the mercy of foreign reserves held by other countries.
Gold is the only new stock Buffett bought in the second quarter — 20.9 million shares in Barrick Gold, now worth almost $600 million. He did far more selling than buying, Fortune reported.
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People who are scared rush to gold, Buffett has said in the past by way of denigrating the precious metal as an investment.
“Gold is a way of going long on fear,” he once said. “If they become more afraid, you make money. If they become less afraid, you lose money, but the gold itself doesn’t produce anything.”
Buffett has also said that gold is a static asset that produces nothing and merely “looks back at you.”
Berkshire’s equity moves are usually attributed to CEO Buffett, who oversees the company’s stock portfolio, which totaled about $217 billion at the end of the second quarter, Barrons reported.
“But in the case of Barrick, there is a good chance that the purchase came from either Ted Weschler or Todd Combs, Buffett’s investment lieutenants who each manage about $15 billion of Berkshire’s equity portfolio.”
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Berkshire recently dumped its stake in investment banking giant Goldman Sachs, according to its Friday regulatory filing with the Securities and Exchange Commission. It cut back on big banks Wells Fargo, JPMorgan Chase, PNC , Bank of New York Mellon, U.S. Bancorp and M&T. Berkshire pared back stakes in credit card giants Visa and MasterCard.
Buffett has also soured on the airline industry and Berkshire no longer owns shares of Southwest, Delta, American or United airlines.
Buffett clearly jumped to pull out of stocks most hurt by the coronavirus-related shutdowns, according to Fortune.
“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful,” Buffett famously wrote in his 1986 shareholder letter.