Why Warren Buffet hates gold!
But why you shouldn't..
Warren Buffett has shaped modern investing more than almost anyone alive. And yet, one of his most consistent beliefs goes against what most investors hold dear:
He wants nothing to do with gold.
Gold is seen as safety. As insurance. As something that protects you when everything else breaks. So the real question becomes: Why does someone who thinks so long term reject the metal completely?
This comes down to how he thinks about what makes an asset valuable.
Why gold fails Buffet’s test
Buffett filters everything through one idea: Does this asset produce anything?
A business builds products, solves problems, earns profits and reinvests those profits to grow. But gold? It doesn’t do any of that. It doesn’t innovate or multiply. It doesn’t create new value. It just sits there.
That’s why he calls it “unproductive”.
And to explain that idea, he used one of the most striking comparisons he has ever written: The gold cube.
Imagine a pile consisting of all the gold ever mined in human history. Roughly 170,000 metric tons. Let’s call it pile A.
Now imagine melting every bit of it into a perfect cube sitting on a field. It would be about 68 feet tall on each side. A small building made entirely of gold.
At the time he wrote about this (2011), that cube was worth around 9.6 trillion dollars.
Now, create a pile B costing an equal amount. For that amount, you could buy:
400 million acre of farmland in the United States
Sixteen Exxon Mobils
And still leave a trillion dollars in cash
These two options represent two different worlds.
The farmland produces crops every year, generating roughly $200 billion annually from 400 million acres. The 16 Exxon Mobils combined produce tens of billions in profits each year, pay dividends, and reinvest in growth. Over decades, these assets compound, creating far more value than the initial $9.6 trillion investment
But the cube of gold? It does nothing. A hundred years later, it will be the same cube. Same shine. Same weight. No output.
That contrast is the heart of Buffett’s rejection.
So why do people buy gold?
Well, if gold produces nothing, why do prices rise?
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Buffet says that this is because gold is driven more by behaviour than by productivity. People rush to it when they feel uncertain: inflation, recessions, war, currency swings.
Gold rises when fear rises. Not because it creates value, but because people expect other people to value its stability even more in the future.
And that, according to Buffet, is the uncomfortable truth behind most cycles in the metal.
But why do we say you shouldn’t hate gold?
Because here’s where things get interesting.
When you compare long term returns, the answer changes depending on where you are.
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.
How can the same metal behave so differently?
Three reasons shape the difference:
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.The rupee weakened significantly
Gold is priced in dollars.
So every drop in the rupee automatically boosts domestic gold prices.Limited access to global assets
For many years, Indian investors couldn’t diversify easily outside the country.
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!
What this means for you..
You don’t need to take an extreme position.
Gold doesn’t compound like a company, but it protects you in ways a company can’t. It won’t build wealth on its own, but it stabilises a portfolio when other assets move wildly.
A small allocation gives balance — It doesn’t need to compete with equities. It just needs to sit quietly alongside them.
Yes, Buffett avoids it. But that doesn’t mean you have to.
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That’s all for today, folks! See you next week!
Cheers,
Ankur
ALT Decoded is a publication by ALT Investor that helps investors get crisp financial insights about high-return, non-traditional asset classes.
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