Why Major Banks Are Bullish on Gold, an Asset Warren Buffett Disdains
Gold remains a safe-haven asset because, historically, its value has risen during wars, recessions, and political instability rather than decreased. Over time, it has become an investor’s security, especially when other assets are affected by market instability and inflation. Gold preserves purchasing power when currencies weaken and is globally recognized.
It’s used both for investor portfolio diversification and for retail jewellery. Its limited supply reinforces its role as a store of value, fostering universal trust in this metal. Similarly, multiple cultural stigmas are attached to gold, making it an ideal option for displaying wealth. The most interesting fact is that now the prominent institutes are rushing towards heavy gold accumulation.
On one hand, it builds investor trust; on the other, it raises questions about why they are so quick to collect gold and what to expect. Governments are now holding gold to diversify away from the US dollar. Central banks are accumulating gold to stabilize economies.
Gold prices rose above $4,000 per ounce this year. It confirms that gold will remain a safe investment option even in global uncertainty. Major institutions such as Goldman Sachs and JPMorgan have consistently forecast high gold prices. They cite currency risks and record central bank buying as a significant factor behind this. They say gold is a hedge against systemic risk and volatility.
However, gold has also been criticized by figures like Warren Buffett, who repeatedly call it an “unproductive asset”. He says gold produces no cash flow or earnings. In his shareholder letter, he stated that “Gold gets dug out of the ground in Africa, or somewhere. Then we melt it down, dig another hole, bury it again, and pay people to stand around guarding it.”
He further added that “It has no utility. Anyone watching from Mars would be scratching their head.”
In 2011, in a CNBC interview, he said, “If you took all the gold in the world, it would form a cube about 67 feet on each side. For what? You could look at it, you could fondle it, but it won’t do anything. It won’t produce anything.”
He further added that “I will say this about gold: If you took all of it, you could make a cube 67 feet on each side. You can get a lot of things with it, but it won’t do anything. It just sits there.” In the Berkshire Hathaway Annual Meeting, he emphasized that “The one thing I can tell you is it won’t do anything between now and then except look at you.”
In 2020, Berkshire Hathaway briefly invested in a gold mining company. However, analysts noted that it was a tactical move, rather than a philosophical endorsement. According to multiple analysts, the clash between banks and Buffett is their focus. Banks emphasize the demand and protection, but benefit from growth and productivity.
