3 Things About Warren Buffet’s Recent Gold Purchase Nobody Understands

How the facts lie far away from the headlines

Warren Buffet recently purchased Barrick Gold Corp. According to the most recent 13F filing that ended on June 30, 2020, he purchased approximately 20,918,701 shares in them.

Every major publication has called this Buffet’s way of betting against the United States. However, here’s what we actually know.

The numbers.

Barrick Gold Corporation is a mining company. It’s not an actual bet on the commodity, it’s derivative of it. If we were to literally count the amount of this company he bought, it adds up to $563,549,805.

Let’s put this in perspective. $500 million is a lot of money — It’s a lot of money for everyone except Buffet. The market value of his holdings at Berkshire, according to the 13F filing, is $202 billion. This isn’t including his $150 billion cash pile he has growing. In this filing, he sold his entire stake of Goldman stock, all of his shares in Occidental Petroleum, most of his shares in Sirius XM, over half of his stake in JPMorgan Chase, and 26% of his stake in Wells Fargo. His selling spree amounted to over $10 billion. His purchase in Barrick amounted to $500 million.

Compared to his equity and cash pool, the Barrick holding represents .1% of his portfolio.

What about America’s currency?

For Buffet to be betting against America, he should have a hedge against the currency he’s holding. If America fails, surely the currency won’t hold, either. However, this isn’t true, as Buffet’s portfolio is only growing — outside of Apple stock — in cash.

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With more than $150 billion in current cash holdings, it’s hard to believe this is a person who will hedge against the United States on a holding that amounts to $500 million. It’s even more difficult to ascertain his principles from a holding this small, too.

Certain banks have strong holdings in his portfolio.

Specifically, Bank of America. Buffet has been increasing his Bank of America holdings over the last few months. Currently, he’s holding almost a billion shares in the bank, representing a value just shy of $24 billion right now.

Here are Buffet’s words about the coronavirus:

“I remain convince [that] nothing can basically stop America. The American miracle, the American magic has always prevailed and it will do so again.”

Buffet doesn’t seem unenthused about the status of America. His words signal a confidence that has always existed. In fact, his massive selling spree is signaling a reorganization in his holdings and not a bet against America. His holdings in banks like Bank of America highlight his belief in certain management teams better than others.

If Buffet got rid of all the banks and purchased billions of dollars in gold ETFs and mining companies, maybe that would be the time to sound the alarm bells. However, this isn’t that instance, and Buffet’s literal holdings aren’t showcasing that desire.

Written by

UC Berkeley, mathematics. Los Angeles. Long-time runner. Top writer on Quora, 100M+ total content views. New to Medium. Inquiries: Moumj@berkeley.edu

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