Warren Buffett: All Gold is Fool’s Gold

In a recent article in Fortune magazine, Berkshire Hathaway’s (NYSE:BRKA) Warren Buffett devoted a very evocative section to the present greed for gold. In the article, Buffett argues that all gold does not glitter when it comes to long-term investing.

Gold (NYSEARCA:GLD) is consistently overvalued, said Buffett. If one were to melt down all the gold and form it into a large cube, said Buffett, it would only be about 68 feet on each side — small enough, observes Buffett, to be nestled in the infield of a baseball stadium.

And yet, the monetary value of that gold would be about 10 trillion dollars. But what would be it’s actual value? That cube will produce nothing for the next century, said Buffett, nor even the next millennium. It will not pay interest or dividends, and it will not respond if you try to “fondle it.”

With $10 trillion, one could purchase the entire American cropland or Exxon-Mobil (NYSE:XOM) sixteen times over and still have about $1 trillion left over for “walking-around money,” said Buffett.

Those investments would yield trillions of dollars in new dividends, and after 100 years could be sold for far, far more than the cost of their purchase.

Crops and energy will always be viable because they satisfy a need, said Buffett. Conversely, the cube of gold will only be as valuable as what people will be willing to pay for it.

To contact the reporter on this story: Jonathan Morris at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com