Investing in Gold – Perspectives

While Warren Buffett, one of my favorite investing legends turned 90 couple of days back, it was also interesting to note that he bet on gold 2 weeks back when he invested approximately USD 560 million+ in Barrick Gold (NYSE:GOLD). While, this came as a huge surprise, considering that he had always abhorred investing in the previous metal.

Some of his earlier thoughts around NOT investing in the previous metal:

• “(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.”
• “It just sits, and there is a cost for it to sit. And an opportunity cost.”
• “You can fondle the cube, but it will not respond.”

Well, its difficult to decipher as to what changed his mind. While there are various anecdotes which are playing out: Is Mr. Buffett betting against America? Is he betting against the US economy? Should you follow his gold investment? Has he lost his marbles at this age?

While WB is closely followed, there is another portfolio manager called Anthony Deden, Chairman and Founder of Edelweiss Holdings Ltd. He started taking position in gold in 1998 when he visited one of the gold mines and started accumulating physical gold since he felt that it was mispriced.  His firm is touted to have one of the largest holders of physical gold in the world.

His views around gold is something which I found extremely fascinating. According to him, gold provides 3 components: Scarcity, Permanence and Independence from the financial system. Have kept some of his thoughts verbatim below:

Scarcity: Anthony’s philosophy has been to look after his client’s savings in a way as if it were the only money in the world they had. While unlike other fund managers or asset managers, he thinks maintaining this principle alone enables him doing the right things all the time. Also, this has propelled some of his clients to put almost all their financial savings and wealth parked with him.

Permanence: It’s a permanent asset, it’s a durable asset. Any good investment operation, particularly it involved irreplaceable capital, must have embedded in it a source of continuity and substance and reserves. While years ago, he was ok buying treasury bills, commercial paper, bonds and time deposits. However, he has started to believe that virtually all of those things are actually debt.  When you deposit money in the bank, the bank doesn’t actually hold it in their vault, it’s a liability of the bank. When you buy a treasury bill, you’re buying somebody’s debt and you call it an asset. So, I decided I want my liquidity not to be somebody else’s liability. I want it to be an asset.

Independence: It can be sold to anybody, anywhere in the world at a moment’s notice. Something no one actually owes me. It’s not a claim on anything. It’s not a promise for anything. And there’s a sense of peace that I possess by having financial strength that even central banks don’t do.

The above ‘gyaan’ on why investing in GOLD is perhaps much better than many so-called pundits who rattle some gibberish and their prediction on the pricing of the shiny metal, most of it doesn’t make any sense.

If you want to know more about Anthony’ thoughts, please click Investment Lessons + Framework + Principles – Anthony Deden. This is absolute treasure!!

Disclaimer: Please note that these are my personal views. While I am NOT a registered Research Analyst as per SEBI (Research Analyst) Regulations, 2014, all investors are advised to conduct their own independent research into individual stocks or industries before making any decision. In addition, investors are advised that past stock performance is not indicative of future price action.