Like any smart investor, Buffett prefers to have the goose that lays a golden egg than just the egg itself. And that’s exactly what Barrick Gold’s stock is to a value investor like him…
You don’t need to pay anyone to insure it. You don’t need anyone to protect it. And it’s an easy way to make a play on the price of gold while collecting a modest 0.96% dividend yield along the way. Because if the price of the stuff Barrick is pulling out of the ground is going up, so are the profits and share price of Barrick Gold’s stock.
Now, the actual precious metal is well-known as a safe-haven investment. One of the many reasons is that it’s also used as a hedge against inflation.
You see, the price of gold is largely based on supply and demand. And the supply (despite the efforts of outfits like Barrick Gold) remains relatively constant. Even though more and more gold is being pulled out of the ground every day, there’s rarely a surge in supply. Because once someone buys that gold bracelet, it’s either worn or put in a drawer and off the market for years at a time.
On the other hand, when the Federal Reserve is printing money like crazy, it drives down the value of the dollar. And that can cause inflation… which is exactly what pushes some folks toward the safe haven of gold. Hence the increase in demand during volatile times and the subsequent spike in price… and the same goes for the Barrick Gold stock price.
But again, Berkshire Hathaway didn’t buy actual gold. It bought a stake in a mining company… one that’s share price ebbs and flows with the price of the commodity. And that’s just one way to invest in gold in a volatile market.
But is it the best way to invest in gold this year?
Well, we don’t know yet. But at the very least, it’s a relatively safe bet. Especially at a time when so many investors worry about what may come next.
The pandemic isn’t done leaving its mark on the economy. Trade tensions between the U.S. and China remain high. And U.S. debt is skyrocketing faster than ever before.
So are Buffett and Berkshire Hathaway acting on fear?
It’s quite possible. And other investors may soon follow suit.
You don’t need to pay anyone to insure it. You don’t need anyone to protect it. And it’s an easy way to make a play on the price of gold while collecting a modest 0.96% dividend yield along the way. Because if the price of the stuff Barrick is pulling out of the ground is going up, so are the profits and share price of Barrick Gold’s stock.
Now, the actual precious metal is well-known as a safe-haven investment. One of the many reasons is that it’s also used as a hedge against inflation.
You see, the price of gold is largely based on supply and demand. And the supply (despite the efforts of outfits like Barrick Gold) remains relatively constant. Even though more and more gold is being pulled out of the ground every day, there’s rarely a surge in supply. Because once someone buys that gold bracelet, it’s either worn or put in a drawer and off the market for years at a time.
On the other hand, when the Federal Reserve is printing money like crazy, it drives down the value of the dollar. And that can cause inflation… which is exactly what pushes some folks toward the safe haven of gold. Hence the increase in demand during volatile times and the subsequent spike in price… and the same goes for the Barrick Gold stock price.
But again, Berkshire Hathaway didn’t buy actual gold. It bought a stake in a mining company… one that’s share price ebbs and flows with the price of the commodity. And that’s just one way to invest in gold in a volatile market.
But is it the best way to invest in gold this year?
Well, we don’t know yet. But at the very least, it’s a relatively safe bet. Especially at a time when so many investors worry about what may come next.
The pandemic isn’t done leaving its mark on the economy. Trade tensions between the U.S. and China remain high. And U.S. debt is skyrocketing faster than ever before.
So are Buffett and Berkshire Hathaway acting on fear?
It’s quite possible. And other investors may soon follow suit.
