Why Even Buffett is Buying Gold

After years of mocking gold, the Oracle of Omaha just bought $560 million of it…

This story was originally published here.

After years of mocking precious metals and completely ignoring them in the Berkshire Hathaway portfolio, Uncle Warren has done a serious 180 and dropped $560 million to buy over 20 million shares in Barrick Gold (GOLD) — the second-largest gold company in the world.

Not only did he make that market-moving trade, but he also dumped shares of JPMorgan and Wells Fargo…

The move wasn't lost on Wall Street, and shares of GOLD quickly jumped over 8% in after-market trading following the announcement. The Buffett effect was made even stronger based on his long history of not only avoiding gold investments, but actively mocking them.

Here's a quick “greatest hits” of Buffett's gold trash talking. The one being trotted out most recently is:

Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility.

Anyone watching from Mars would be scratching their head.

We all get the point: gold doesn't pay dividends, it doesn't compound itself and yes, it has very little use outside of industrial purposes. But, I think if Martians were looking down at the current market, they wouldn't be scratching their enlarged green heads about gold so much as the rising stock market in the face of so many red flags.

To wit, here's another Buffett nugget:

Gold is a way of going long on fear, and it has been a pretty good way of going long on fear from time to time. But you really have to hope people become more afraid in a year or two years than they are now. And if they become more afraid you make money, if they become less afraid you lose money, but the gold itself doesn't produce anything.

What motivates most gold purchasers is their belief that the ranks of the fearful will grow.

Growing they are…

Personally, I don't see a clear path to a fearless stock market over the next year. We have over 30 million unemployed Americans. We have a runaway Federal Reserve dumping trillions into the economy — devaluing the dollar and adding a historical amount to the national debt.

In fact, the government will borrow more this year than it raises through taxes. The last time that happened? The last year of World War II.

Regardless of who becomes “King” next year, all of his horses and all of his men will not be able to put that together again…

Editor's Note: Click here to keep reading.

Here’s how high gold could go (inside)

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