State Street Global Advisors Inc. Vice President Christopher Goolgasian is fond of gold. He should be, as his company markets a gold fund valued at $74 billion. Mr. Goolgasian is also fond of the infamous investor Warren Buffett. What he is not fond of is Mr. Buffett’s aversion to the precious metal. Mr. Goolgasian recently made his thoughts public, as reported by Bloomberg on Monday.
In a regulatory filing for the exchange-traded fund SPDR Gold Trust last Friday, Mr. Goolgasian stated that in addition to not owning the precious metal, Mr. Buffett also never held shares of Google or Apple. Since August 2004, Google share prices have risen 530 percent. The performance of Apple shares has been even more impressive, with the price increasing approximately 1,500 percent since January 2000. Mr. Goolgasian hints that the man dubbed the “Oracle of Omaha” may not be as spot-on with his predictions as many think.
The portfolio manager noted that since January 2000, shares of Berkshire Hathaway Inc. (which is owned by Mr. Buffett) have increased 105 percent. During that time, gold prices have increased almost fivefold. Mr. Buffett recently advised investors to avoid the precious metal because it has limited use and is not able to create new wealth. He believes that a long-term gain will only be realized if the pool of buyers continuously expands.
In his recent annual letter to Berkshire Hathaway shareholders, Mr. Buffett stated that buyers of the metal are motivated by a “belief that the ranks of the fearful will grow.”
Looking back over the past ten years, the investor admitted that this belief has proven correct. He believes that aside from that, the climbing price of the metal has spurred additional purchasing by individuals who believe the increase proves a hypothesis of investment. These investors, he said, “create their own truth—for a while.”
Mr. Buffett estimated that if melded together, the worldwide stockpile of gold would create a cube measuring approximately 68 feet per side. At a price of $1,750 per ounce, this cube would have a value of $9.6 trillion. He stated that for this amount of cash, an investor could purchase Exxon Mobil Corp. 16 times over, acquire all U.S. cropland, and be left with $1 trillion spending money. Though Mr. Goolgasian believes that Mr. Buffett is “the greatest investor of our time,” he questions the great one’s perspective on the golden metal.
According to Mr. Goolgasian and his counterparts at State Street, Mr. Buffett thinks that only those investments that complement his beliefs are worthwhile. State Street, on the other hand, just wants to beat the market any way possible, said the portfolio manager. Mr. Buffett has not yet responded to an email requesting his comments on these thoughts.
On the New York Comex on Monday, gold futures for April delivery fell 0.2 percent, ending the day at $1,703.90. Holdings of the metal in the SPDR Gold Trust, which is the largest bullion-backed exchange-traded fund, remained unchanged at 1,293.68 metric tons. Prices for the metal declined for the second consecutive session following news that China lowered its economic growth target. The country reduced its growth rate goal from eight to 7.5 percent, which is its lowest target since 2005.
Prospects for China gold demand, as well as demand for other commodities, are now bleaker. This is negatively affecting market sentiment, though analysts report that from a macro perspective, the golden metal remains favorable. Lingering concerns regarding sovereign debt, low interest rates, and long-term inflation possibilities are supporting the price, extending the bull run to a 12th year.
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