Broker Check

A (Golden) Nugget of Wisdom

April 04, 2024

This week, I've seen more than a few outlets covering gold's increase in value. Although it's true that the commodity recently reached a record high, it's essential to understand what factors are driving the most recent rally that started in late February.1,2

Gold has grown over 10 percent in more than 30 days thanks to increased central bank buying, growing international tensions, and boosted demand, which has caught the attention of some on Wall Street.1

In this instance, when I’m speaking about gold, I’m talking about spot prices for the precious metal, not the commemorative bullion you see in television advertisements.

However, while gold may be having a moment, I can't help but think of Warren Buffet's thoughts on the subject. In 2011, Buffet suggested that investors could choose to buy all the gold currently in circulation or use that same amount to buy all the cropland in the U.S. and still have enough left over to purchase a major company 16 times over.2,3

If the investor bought the farmland, they may be able to reap the financial and agricultural benefits for a very long time. In contrast, purchasing gold for the same amount would result in owning that same amount of gold and nothing more. In other words, one strategy looks to grow your wealth over time, while the other merely holds an asset with the expectation that it may appreciate over time.

I'm watching the price of gold and will keep you updated.

1. Reuters.com, April 3, 2024. "Gold Extends Record Run on Firm Safe-haven Demand, Rate Cut Hopes"
2. The price of gold can be affected by developments such as currency devaluations or revaluations, central bank movements, economic and social conditions within a country, trade imbalances, or trade or currency restrictions between countries. There is no guarantee that gold will maintain its value or purchasing power in the future. Gold and other speculative investments are not appropriate for every investor.
3.. Cnbc.com, April 1, 2024. "Gold prices are at an all-time high—but experts like Warren Buffett don’t always recommend investing"