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Gold’s no match for American mettle: Warren Buffett

It’s no secret that Warren Buffett doesn’t like gold as an investment. The legendary investor used an example in his 2018 letter to drive home his point about the importance of not panicking and investing in stocks over gold for the long run.

Buffett highlighted the 40,000% surge in the US’s national debt over the past 77 years, and said if you “panicked at the prospects of runaway deficits and a worthless currency” and bought 3.25 ounces of gold with your $114.75 (the amount Buffett invested when he purchased his first shares of stock in 1942) it would be worth about $4,200, or “less than 1% of what would have been realised from a simple unmanaged investment in American business.”

He added: “The magical metal was no match for the American mettle.”

Over the years, Buffet has taken his fair share of swipes at the precious metal.

At Berkshire’s 2018 annual meeting, Buffett compared $10,000 invested in stocks and gold in 1942 (the first year he invested in stocks). That money invested in an S&P 500 index fund (there were none at the time, he noted) would’ve been worth $51 million in 2018 while a gold investment would’ve been worth only $4,00,000.

“In other words, for every dollar you could have made in American business, you’d have less than a penny of gain by buying into a store of value which people tell you to run to every time you get scared by the headlines,” he said.

And in his 2011 letter, Buffett noted that for $9.6 trillion you could buy “pile A” — all of the gold in the world, or “pile B” — the entire US cropland (400 million acres) plus 16 ExxonMobils and still have another $1 trillion left over.

or For every dollar you could have made in American business, you’d have less than a penny of gain by buying into a store of value which people tell you to run to every time you get scared by the headlines