A week ago, the trading news from the legends’ corner was that Warren Buffett had poured over $2 billion in Bank of America in just 12 days, boosting his stake to nearly 12%. This week, the big news is that Buffett has gone off banks--except BofA--and is betting on the one thing no one thought the legendary investor would ever buy into: Gold, that precious metal that Buffett has long decried as having “no utility”.
Based on Friday 13-F filings, Buffett’s Berkshire Hathaway sold shares of big banks--including Wells Fargo and JPMorgan Chase--and completely exited Goldman Sachs. Instead, he bought 21 million shares in Barrick Gold (NYSE:GOLD) worth $563 million.
The media is all over it because Buffett makes for good headlines, and the favorite of these headlines suggests that Buffett--again, not a fan of gold--is actually betting against the American economy--whose backbone is big banks-- in this latest move.
Gold bulls embraced the news as a sign that the precious metal is ready to explode even beyond its current level of around $1,933, after hitting over $2,000 last week.
For Barrick Gold, of course, the news was a nice boost. Following the disclosure on Friday, the Barrick stock gained over 8% after hours. It was the only new stock Buffett bought in 2020.
So, does this mean that Buffett is now a gold bug?
Does it mean, as Zero Hedge opines, that it’s “a signal that none other than the Oracle of Omaha appears to now be quietly betting against the United States” by abandoning banks for a gold miner?
First of all, Buffett didn’t buy gold. He bought GOLD--as in Barrick Gold, a gold mining stock, not physical gold, which is the media’s first glaring mistake.
The more realistic scenario is that Buffett bought Barrick because of the dividends.
On Friday, Barrick Gold declared a Q2 dividend of 8 cents a share, up 14%. And it’s been a good stock to own this year--up around 50% this year--and rising gold prices are definitely helping.
But it’s also important to keep in mind that he hasn’t abandoned banks in general: He’s still investing big in Bank of America.
Continuing with the obvious theory that Buffett didn’t actually buy gold, Sitka Pacific Capital Management’s Mike Shedlock wrote in a blog post: “Buffett knows financials are struggling due to COVID. And Barrick pays a dividend. This is neither a huge cave-in nor a fundamental sea of change regarding gold. Potentially it is a short-term sell signal that corresponds to the recent pullback.”
In the meantime, there are others lining up to turn this Buffett move into a major game-changer: The crypto world.
Some analysts believe that Buffett’s Barrick bet will indirectly boost bitcoin.
Max Keiser, the founder of Heisenberg Capital, told Cointelegraph that Buffett’s move could help push BTC to $50,000.
“Global $100 trillion fund management biz is less than 1% invested in Gold. With Buffett now moving into Gold. Expect global allocation of 5% AU min. Implies $5,000 Gold. Expect a 1% BTC global allocation ($1 trillion). This implies $50,000 for Bitcoin Expect PTJ ups to 10%,” Keiser said.
By Michael Kern for Safehaven.xom