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Warren Buffett on Investing in Gold

Warren Buffett's idea of a great asset is an asset that produces something. This is why he feels gold is not a great investment.

People invest in gold hoping that someone else will buy it at a higher price the next year. The gold doesn’t change, and it doesn't produce anything. Gold investors look to the price change rather than the output of the investment.

Buffet says that all of the gold in the world that has ever been produced comes to about 165,000 metric tons. If you made it all into a cube, the cube would be about 67 feet on each side. Currently, that cube would be worth $7 trillion. That is only a fraction of the stock market’s worth.

All the farmland in the United States is about a billion acres - that's a little over 1.5 million square miles - about half of the continent of the United States. The value of all the gold in the world is worth

  • All the Farmland in The United States

  • Plus, 7 Exxon Mobil's

  • Plus, a Trillion Dollars of Walking Around Money

So, you could own a 67-foot cube of gold, a portion of the stock market, or 1 billion acres of farmland, 7 Exxon Mobil stations, and 1 trillion dollars. Which would you rather have?

For Buffet, it’s an easy decision. You can buy gold and keep it for a hundred years and sell it at the end of the hundred years, having gotten nothing out of it, or you can buy some farmland and make a profit on it every year and still have the farmland at the end of 100 years.

But people still invest in gold, and Buffet claims fear of money is their motivation.

Buffet’s point is, you can buy gold, you can hold it, and you can sit on top of it, but it isn't going to deliver productivity. The businesses that you can invest in through the stock market or a piece of land are producing products or services that consumers need or want. That is their value.

As you can see, there's a substantial difference between an asset that produces an income and an asset that you are waiting for somebody to pay you more on. That's one of the most beautiful parts about real estate. Like gold, it’s value goes up over the long-term – people will always need a place to live - but like a business, it produces an income.

This is exactly why I love real estate as an investment tool.

If you are looking for assets that produce a high rate of return, feel free to reach out to me on my cell phone at 608 306 1199.

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