Thursday, 16 February 2012

Why Buffett is cold on gold

One of Buffett’s favourite topics of late has been investors’ fascination with gold and with cash (in the form of bonds). As usual, Buffett explains a complex issue in simple terms.

Buffett characterises gold as one of the assets “that will never produce anything, but that are purchased in the buyer's hope that someone else – who also knows that the assets will be forever unproductive – will pay more for them in the future”.

I can already hear the gold fans shouting at this point. The last few years have seen the price of gold skyrocket.
With the risk of government default and the inflationary effects of '‘quantitative easing'’ (a gentleman’s expression for cranking up the printing presses to deflate the currency and stimulate demand), many see gold as something real, solid and measurable – an asset whose quantity can’t simply be increased at the whim of a nervous central banker.

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