The luster on gold seems to be fading off. Although the precious metal is still up by more than 27% from a year ago, it is down from last month. Gold is a hedge and its loss of steam may mean that investors are turning back to the riskier assets. When investors’ optimism about the future grows, the race to take on safer assets like precious metals normally slows down.
The fact that Warren Buffett, the Oracle of Omaha, has offloaded some of his gold investments recently only shows that the best of times for gold might be behind us, at least for now.
Investors throughout the world seem to emulate Buffett’s investing style. If Berkshire Hathaway sells gold, not many will think about buying it. Buffett is the CEO of Berkshire Hathaway. Also, when the firm minimizes its stake in Barrick Gold by up to 40% after less than a year of owning it, that is quite notable.
Buffett is famous for long-term stock holdings and it is in stark contrast to what is expected of him when he sells in less than 12 months. That is an interesting move given that Barrick Gold has experienced massive performance.
Why He Sold Gold
When Buffett decided to sell airlines’ stocks earlier in the year, he was quite pessimistic about the sector’s future. It resulted in a massive sell-off of the company’s holdings across major US-based airlines. There could be another explanation for this decision, but it is speculated that he does not expect the future of gold to remain as bright as it has been earlier in the year.
The COVID-19 vaccine expectation has impacted the outlook for gold. But before that, the economy was already regaining its strength in fits and starts. China is leading the way to global economic recovery. The Asian economic giant is already seeing an increase in demand for products from luxury goods to industrial metals.
Also, the United States is expected to experience some healthy growth in 2021, which may dent the price of gold further.
Should You Sell Now?
Many investors now think that it is a good idea to take profits before gold falls any further. Simultaneously, experts advise that investors should hold some gold, maybe in the form of exchange-traded funds (ETFs), to maintain a few safe investments in the case that all other investments break down. Thus, you should sell some and hold some.
You can acquire some of FTSE 100 stocks whose share prices are still low but their prospects have improved. Although Buffett may lead the way on gold, you can buy some airline stocks since they will eventually rise.
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