If you have seen the gold news headlines lately then you have noticed that both Buffett and Gartman have shown their non-interest in gold. But the author of this article demonstrates why their arguments are flawed and why buying gold is actually and smart and good investment.
By Eric Fry
03/06/12
Daily Reckoning
Warren Buffett doesn’t like gold. Neither does Dennis Gartman. That settles it for us; gold must be a table-pounding buy.
In this year’s annual letter to Berkshire Hathaway shareholders, Warren Buffett scorned gold as an asset that is “forever unproductive.”
“[Gold] will never produce anything,” he wrote. “Gold has two significant shortcomings, being neither of much use nor procreative.”
Buffett’s statement is literally correct, but it has two significant shortcomings, being neither of much use nor insightful. No one holds gold hoping it will produce something. They hold gold because no one can produce it. Precisely for this reason, mankind has considered gold the ultimate money for several thousand years…and it has performed this role with meritorious distinction.
Gold’s appeal waxes and wanes, of course, depending upon the monetary environment in which it resides. But the less folks trust the cash in their pockets, the more they trust gold…and that’s exactly what’s been happening throughout the Western world for more than a decade.
Therefore, despite gold’s “significant shortcomings,” it has delivered a much higher return during the last 14 years than the “useful” and “procreative” Berkshire Hathaway. As the chart below shows, the “rolling 10-year return” of gold has been higher than that of Berkshire Hathaway since January 2008.
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