Warren Buffett Could and Should Buy All the Gold in the COMEX Now

By Jeff Clark, Senior Analyst, GoldSilver
APR 8, 2019

Dear Warren Buffett,

Your recent comments about gold left me a little puzzled. You said “the magical metal was no match for the American mettle,” and that we shouldn’t “panic at the prospects of runaway deficits and a worthless currency.” You end by showing how stocks have outperformed gold since 1942.

The problem with your report is one that many investors make: you compare apples to oranges. Not only do stocks and gold serve different functions, but my gold outperforms your stock during crashes and crises. It’s even outperformed stocks for the past 20 years.

Not only that, you might want to take a look at just how small this market is. You could take easily take control of it employing just a small portion of your company’s cash – just like you do with many companies you buy.

Here are the reasons you should reconsider your anti-gold stance and become friends with the yellow metal…

#1. My Gold Beats Your Stock When It Needs To

Berkshire Hathaway stock, like most stocks, performs well during equity bull markets. But my gold outperforms it when they don’t.

BRK-A shares have crashed six times in the past 20 years. Here’s how gold performed during each of those crashes.

Chart: Gold During Berkshire Hathaway Stock Crashes

During BRK’s six major crashes, gold rose in half of those instances. It was flat in one, and fell twice, though only a third as much as your company’s stock.

In other words, gold has outperformed your stock every time it’s crashed.

#2: Gold Is a MUCH Better Crisis Hedge

The reason gold has outperformed your stock during crashes is because gold is inversely correlated to stocks. It’s a crisis hedge, providing investors with portfolio insurance against all sorts of interim political and economic uncertainties (and being history’s singular best bet during times of outright calamity).

How have the performance of stocks and Treasuries compared to gold during the past couple decades’ wide variety of crises?

Gold vs. SP 500 and Treasuries During Crises

Gold has not only trumped stocks but even Treasury bonds, which many consider to be the safest asset to own in times of crisis. But they aren’t. Not when compared to gold.

This is why we shouldn’t be enemies. Stocks and gold are complementary. Your stock outperforms gold in good times, but gold outperforms your stock in bad times.