Gold Miners Will Piggyback Off Gold’s Rise
Gold Miners Will Piggyback Off Gold’s Rise by Andrey Dashkov for Casey Research
One of gold’s biggest critics just changed his tune.
I’m talking about Warren Buffett. “The Oracle of Omaha” has a net worth of about $78 billion, making him the seventh-richest person in the world, according to Forbes. His company, Berkshire Hathaway, owns about $240 billion worth of investments.
Yet while Buffett made his fortune investing in all kinds of companies, he’s always been negative on gold. Here’s what he said in a speech at Harvard in the 1990s:
Gold 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.
In a way, he’s right. Gold isn’t used for industrial purposes as much as other precious metals are. And Buffett’s also harped on gold in the past because it doesn’t pay any interest or dividends.
Yet last week, Buffett’s company revealed it placed a huge stake in Barrick Gold (GOLD), one of the world’s largest gold miners, to the tune of $565 million. That makes Berkshire Hathaway Barrick’s 11th-largest shareholder.
So what made Buffett do a 180 on one of his most hated investments?
It’s simple: Even gold’s critics are starting to wake up to the fact that we’re in the early innings of a historic gold bull market.
Sure, gold’s fallen a bit recently. It’s down 6% from its all-time high of $2,070 an ounce about two weeks ago.
But this is only a temporary dip. The underlying factors behind gold’s rise haven’t changed.
Below, I’ll explain why this gold bull isn’t stopping anytime soon… and how we can follow in Buffett’s footsteps to take advantage…
This Crisis Will Propel Gold Higher
Last week, I said that gold has all it takes to soar to $2,500 per ounce next year.
Without getting too much into the weeds, I expect that the COVID-19 crisis will drag on until at least 2022. And that will pull down interest rates and the U.S. dollar, boosting the case for gold.
These are not the only factors driving the price of gold, of course.
Inflation is likely to return after the government engaged in massive stimulus programs to fight the economic impact of COVID-19. So far, the Federal Reserve has printed over $3 trillion of new money.
This is a road well-paved for both the U.S. government and its global peers. Papering over problems with fiat money is a trick used in many places, from Venezuela to Zimbabwe.