Home etftrends.com Is Warren Buffett’s Play on Gold a Sign of More Price Increases?

Is Warren Buffett’s Play on Gold a Sign of More Price Increases?

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Warren Buffett, value investing guru and CEO of holdings company Berkshire Hathaway, was fairly staid during the Covid-19 pandemic, while a majority of investors saw a green light to pick up stocks on the cheap. The “Oracle of Omaha” however appears to be hopping on board the gold bandwagon as the precious metal continues its upward trajectory amid the uncertainty caused by the Covid-19 pandemic.

Per a Forbes article by John Navin, Buffet’s company “picked up a nice chunk of a New York Stock Exchange traded gold mining stock, according to whalewisdom.com, which keeps track of the holdings of big institutional investors. Warren Buffett’s firm bought about 21 million shares of Barrick Gold.”

“The Omaha legend is not a market timer as such, but his timing on this one is looking unusually good,” Nain wrote. “Buffett and his long-time associate Charlie Munger are known for their value investing approach — an out-of-favor method on Wall Street these days where growth stocks are venerated, celebrated, and purchased.”

The stock, in particular, that caught Buffett’s eye was Barrick Gold. Berkshire Hathaway was so smitten by the stock it picked up 21 million shares, but with reason.

“Earnings have been solid for Barrick: excellent, in fact, for this year and very good over the past 5 years,” Navin wrote. “The stock trades at 2 times book, higher than perhaps Benjamin Graham might pay, but definitely in the value stock realm, especially when compared to book value of growth stock names.”

Is Buffett’s play on Barrick Gold a sign of broader strength in gold prices?

Mirroring Buffett’s Gold Play via ETFs

Exchange-traded fund (ETF) investors who want to get in on the gold action can look at the VanEck Merk Gold Trust (OUNZ). OUNZ seeks to provide investors with an opportunity to invest in gold through the shares and be able to take delivery of physical gold in exchange for those shares.

OUNZ offers investors:

  • Deliverability: VanEck Merk Gold Trust holds gold bullion in the form of allocated London Bars. It differentiates itself by providing investors with the option to take physical delivery of gold bullion in exchange for their shares.
  • Convertibility: For the purpose of facilitating delivery, Merk has developed a proprietary process for the conversion of London Bars into gold coins and bars in denominations investors may desire.
  • Tax Efficiency: Taking delivery of gold is not a taxable event as investors merely take possession of what they already own: the gold.

As mentioned, one of the key benefits of OUNZ is the ability to exchange shares of the ETF for physical gold. Per the fund’s website, if you’re an “investor interested in taking delivery of physical gold in exchange for your OUNZ shares (Delivery Applicants), you must submit a signed Delivery Application to Merk Investments LLC (the “Sponsor”).

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