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Warren Buffett buys stake in gold mining firm raising speculation of shift in investment philosophy

Shares of Barrick have benefited from rising gold prices, which set a record last week, and rose 3.2 percent in after-hours trading following Berkshire’s disclosure.

August 17, 2020 / 10:43 AM IST

Warren Buffett, known for his criticism for gold as an investment asset, invested in a Toronto-based company, Barrick Gold Corp, which is one of the world’s largest mining companies.

In a regulatory filing detailing its US-listed investments as of June 30, Berkshire disclosed a new 20.9 million share investment worth $563.6 million in Barrick Gold Corp, one of the world’s largest mining companies, reported Reuters.

Shares of Barrick have benefited from rising gold prices, which set a record last week, and rose 3.2 percent in after-hours trading following Berkshire’s disclosure.

Berkshire's investment in a gold mining firm is seen as an indirect investment in gold by Buffett's company, amid the fact that gold has been witnessing strong gains this year as COVID-19 pandemic hit the global economy.

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Berkshire chose the gold mining firm for investment while it cut stakes in some of the largest banks of the US.

Berkshire slashed its stakes in Wells Fargo & Co and JPMorgan Chase & Co and exit an investment in Goldman Sachs Group Inc.

Read more: Warren Buffett’s Berkshire Hathaway slashes Wells Fargo, JPMorgan stakes; adds Barrick Gold

"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,” Buffett has been widely reported as saying so in the past.

Even though the investment by Berkshire was not done directly in gold, it does give an indication that the company played on gold's bright outlook this year. If gold goes higher, the stock goes up much higher.

Berkshire's move is being interpreted by different angles.

Popular investor and market veteran Samir Arora wrote on Twitter: "After years of making fun of gold, it will not be enough to say that one of the Tods may have bought it and they act independently. Without some basic institutional philosophy, what is an institution."

In the past, Buffett has made strong investments in metals. At a time when gold miners are witnessing a rise in their profit margins due to a rise in gold prices, Berkshire's investment in Barrick Gold Corp, at first glance, looks a bet on the trend.

Buffett, one of the most successful investors of the world, invested in gold through equities, leaving the world to keep guessing what it means until he himself speaks on it.
Nishant Kumar
first published: Aug 17, 2020 07:52 am

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