It came as a shock when Warren Buffett’s Berkshire Hathaway announced that it has a massive stake in Barrick Gold, the Canadian gold miner. For many years now, Buffett has a major history of being a loud opponent of investing in gold. Until this investment in Barrick, the Oracle of Omaha never invested in the precious yellow metal or any of its related assets.
The legendary billionaire investor has never been a fan of gold. It is therefore highly likely that he never got directly involved in the decision to invest in Barrick. But, he was not against it which means that he gave that decision a stamp of approval for his trading fans to follow in his footsteps.
Bitcoin has caused a flurry of investment decisions among investors in recent months. Anyone who is a Buffett follower must be curious about what he feels about the nascent volatile market and whether they should invest their money in cryptocurrency. Somehow Buffett appears to be comfortable with investing in gold but avoids bitcoin.
Barrick Stock Plunged
Previously, the Oracle of Omaha has referred to gold as an unproductive asset that he thinks produces nothing over time. Bonds seemed to be a better investment 20 years ago. However, Berkshire has recently pulled back on its bond exposure due to low-interest rates. Buffett likely hates the fixed income debt securities more than he hates gold.
His investment in Barrick came as a shock, coming at a time when the commodity’s prices reached above $2,000. Nevertheless, the price of gold has since pulled back towards the $1,800 region since it reached its all-time high in August 2020. The Q3 2020
filing by Berkshire Hathaway also showed that Buffett cut down on his investment in the stock to almost 40%.
Buffet’s trimming of his Barrick position suggests that he might have just invested in the stock for the potential profits that it would offer. Nonetheless, he is yet to exit his position entirely. It shows that he might be holding onto the stock for another bullish gold run and more profits.
Why Avoid Bitcoin Despite The Meteoric Rise?
Bitcoin reached its all-time high earlier this month recording massive upswings since December eventually peaking at $42,000. Investors who had avoided the crypto started to flock in large numbers towards bitcoin for fear of missing out. Nonetheless, it had an abrupt pullback of 13% which pushed it back to $35,000 within three days.
Currently, the flagship crypto is trading between $31,000 and $36,000 for the past few days and its price keeps fluctuating. The abrupt surge and decline in the crypto’s valuation is a critical sign that it is not yet an investment that investors can rely on for long-term capital growth.
While most investors may be treating the digital currency as a viable replacement for gold as a haven asset, bitcoin is yet to hold any tangible value. Bitcoin’s volatile price relies mainly on investor faith in the stock.
The recent surge and correction in BTC prices show that many profit-seeking investors rushed to the stock to push its price up and pulled out before the crypto corrected itself. Bitcoin is still quite unpredictable for the investors to rely on as a dependable long term investment.
The Parting Shot
Bitcoin is an attractive asset but does not have any underlying value. Previously, Warren Buffett even compared it to rat poison. But, despite his stand on gold, he decided to invest in Barrick Gold. This shows that he considers gold a better investment than cryptos.
While investors get tempted to invest in bitcoin, they should always be aware that the crypto can sink their capital as quickly as it can make them wealthy.
