Why Warren Buffett Would Be Buying Precious Metals Again Today (If He Could) -HedgeEye
"Warren Buffett is famous for many things one of which is his general dislike for precious metals as an investment. But maybe you’re old enough to remember when, just over 20 years ago, he backed up the truck and bought a ton of silver - over 3,000 tons, to be more precise. From the 1997 Berkshire Hathaway letter to shareholders: 'Our second non-traditional commitment is in silver. Last year, we purchased 111.2 million ounces.
Marked to market, that position produced a pre-tax gain of $97.4 million for us in 1997. In a way, this is a return to the past for me: Thirty years ago, I bought silver because I anticipated its demonetization by the U.S. Government. Ever since, I have followed the metal’s fundamentals but not owned it. In recent years, bullion inventories have fallen materially, and last summer Charlie and I concluded that a higher price would be needed to establish equilibrium between supply and demand.'....Currently, we have a very similar situation in gold....Thus it appears that a higher price is, 'needed to establish equilibrium between supply and demand.' All in all, it looks like buying gold today fits neatly into the Warren Buffett way of investing in precious metals. He may not be buying precious metals today - but that doesn’t mean investors who understand the simple dynamics of supply and demand shouldn’t be doing so using the very same thesis he has used successfully in the past."