Dual reasons why Buffett shuns gold

16 February 2012 | By Rob Langston

Berkshire Hathaway chief executive Warren Buffett says he avoids gold because the precious metal has two “significant shortcomings - it is neither much use nor procreative”.

Buffett says people buy into gold in anticipation of a rush to safe assets.

He says: “What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade, that belief has proved correct. Beyond that, the rising price has, on its own, generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As bandwagon investors join any party, they create their own truth - for a while.”

Buffett says he prefers “productive assets” such as businesses, farms or real estate.

He says: “Berkshire’s goal will be to increase its ownership of first-class businesses. Our first choice will be to own them in their entirety - but we will also be owners by way of holding sizeable amounts of marketable stocks.”

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