Guru and Metal: Reason vs. Speculation

XAU/USD

Key zone: 3,950.00- 4,050.00

Buy: 4,050.00 (on strong positive fundamentals); target 4,200.00; StopLoss 3,980.00

Sell: 3,950.00 (on a pullback after retesting the 4.000 level); target 3,750-3,700; StopLoss 4,020.00

The current dynamics of the precious metals market look so attractive that even Morgan Stanley has revised the classic portfolio diversification formula. Instead of the traditional 60/40 balance (stocks/bonds), it now proposes a 60/20/20 model, where 20% of capital is allocated to gold, replacing low-yield bonds.

Even Jeffrey Gundlach, the “Bond King” of Wall Street, has long promoted gold not as a speculative asset but as a structural element of the portfolio — a tool for protection against inflation and market turbulence.

However, not all investment gurus share this enthusiasm. Buffett prefers cash over gold.

Berkshire Hathaway released its 10Q report showing that cash holdings have reached a record $381.7 billion (+$37.6 billion QoQ). The reason is simple — Berkshire has sold more stocks than it bought for the 12th consecutive quarter, reducing its equity portfolio to $283.2 billion.

No stock buybacks have been carried out since Q2 2024, which partially explains the company’s 34% underperformance relative to the S&P 500 since Buffett’s announced retirement. Nevertheless, the “post-Buffett” strategy under Greg Abel’s leadership preserves the old-school principles: capital discipline, a high share of cash, and focus on insurance and infrastructure.

Berkshire’s three largest positions remain unchanged — Apple, American Express, and Bank of America. But when markets become stormy, the company prefers to move into cash rather than gold, as panicking traders typically do.

Why Buffett Doesn’t Believe in Gold?

Warren Buffett is an investor, not a speculator. He has never hidden his belief that gold is an “unproductive asset” — it does not generate cash flow and does not increase intrinsic value without an influx of new buyers.

For Buffett, gold is a bet on fear, not on value. He is against passive ownership of an asset that doesn’t make capital work.

Since the guru consistently invests in assets that create real value, he is more likely to look toward gold miners. There is precedent for this: in Q2 2020, Berkshire Hathaway purchased approximately 21 million shares of Barrick Gold worth $560.565 million, but the position was almost entirely liquidated by the end of 2020.

The conclusion is clear: if one is to invest in gold, it should be through producer companies with positive free cash flow (FCF) and strong capital discipline.

Moreover, gold contradicts Buffett’s classical principle — managing the opportunity cost of risk. Long sideways periods and high storage costs make it less attractive compared to dividends, buybacks, and profit reinvestment.

Buffett’s philosophy is simple: capital must work, not just sit in a safe. In his words, gold is “good when you’re scared, but useless when you’re calm.”

Completely ignoring gold, however, deprives a portfolio of an important hedging tool. Historically, the metal correlates with periods of market panic and rising volatility in currency and commodity markets. For short-term position protection, gold remains an irreplaceable instrument.

At present, there are no strong reversal signals in the gold trend. A correction is possible, but the asset remains in an overbought phase. The fundamental background is aggressive, so traders’ attention is once again focused on the U.S. dollar — the key factor determining the near-term direction of the precious metals market.

So we act wisely and avoid unnecessary risks.

Profits to y’all!