Why Warren Buffet hates gold!

Hey there!

As promised last time, I’m trying to write this newsletter every week and be more regular with it. Today’s piece is a super interesting read! I was surprised when I came to know about this. So…tell me what you think of it, okay?

Okay, we all know Warren Buffett — He has influenced modern investing more than almost anyone else alive. Yet one of his most consistent beliefs is opposite to what many investors instinctively trust.

He wants nothing to do with gold.

That surprises people..because gold is usually framed as safety or insurance. The asset you turn to when markets wobble or currencies weaken. If anyone thinks long term, it’s Buffett.

So why does he reject it so firmly?

Well, the answer lies in how he defines value.

Buffett filters assets through a simple question: Does this thing produce anything?

To explain this, he proposed a thought experiment: Imagine all the gold ever mined in human history, roughly 170,000 metric tonnes. Melt it all down and shape it into a perfect cube sitting in an open field. The cube would be about 68 feet tall on each side. When Buffett wrote about this in 2011, this gold cube would have been worth around $9.6 trillion.

Now imagine investing that same $9.6 trillion differently. In 2011, you could buy around 400 million acres of US farmland, sixteen Exxon Mobils, and still have about a trillion dollars left in cash.

The difference between these two outcomes is stark — The farmland produces crops every year. The companies earn profits, pay dividends, and reinvest to grow. Over decades, these assets compound and expand.

But the gold cube? It remains exactly what it was. A hundred years later, it has the same weight and the same shine, but it hasn’t produced anything.

That contrast captures Buffett’s discomfort with gold.

Buffett’s answer to this is rooted in behaviour. People move towards gold during inflation scares, recessions, wars, and currency stress.

Gold goes up when fear takes over. Not because it produces anything, but because people expect others to trust it even more when things get worse.

And that’s why Buffet hates it.

But should you, as an Indian investor, agree with his logic?

Probably not..and here’s why.

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In the US, Gold has consistently lagged behind major indices like the NASDAQ across 10, 20 and 30-year periods. But in India, Gold has beaten the Sensex over most of the same periods.

But how can the same metal behave so differently in both countries?

Three reasons:

1. The US had a tech revolution

   Apple, Microsoft, Amazon, Nvidia and others pushed equity returns far ahead. India didn’t have a similar wave in the same timeframe.

2. The rupee weakened significantly

   Gold is priced in dollars. So every drop in the rupee automatically boosts domestic gold prices.

3. Limited access to global assets

   For many years, Indian investors couldn’t diversify easily outside the country. So gold became the simplest way to hold something global.

This means Buffet’s logic is correct for an American investor, but not entirely for an Indian one.

We’ve done a detailed comparison of the returns in our blog. Check it out if you’d like to read a deep dive!

View blog

Well, you don’t need to take extreme positions. Gold won’t compound like a great business, but it can stabilise a portfolio when other assets move sharply. A small allocation doesn’t need to compete with equities. It just needs to sit alongside them and do its job quietly.

Buffett avoids gold because he optimises purely for productive assets. Most investors are optimising for balance, resilience, and peace of mind as well. Those goals overlap, but they’re not the same.

In short, use gold as a diversifier, not as a core asset, and you should be okay :)

If you’re not reading this on email, do subscribe to my weekly newsletter. I send out quick, 5 minute reads like this every week.

Well folks, that’s all for today!

Hey by the way, like I said, I’m going to write every week now, and I’d love to know what you’d like to read on this newsletter. I’m happy to research and write on any stuff related to finance or business. So just comment or reply to this email and let me know?

Cheers,

Ankur