Gold Is A Dumb Investment

This is Warren Buffett's take on owning gold.

Here is how he explains it in his letter to Berkshire-Hathaway shareholders:

Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A. 

Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?

But . . .
The cost of a year at Yale College – tuition, room and board – is roughly the same as it was a century ago when measured in gold.

Interesting, though the chart doesn't disprove Buffett's point. If you had put your year-at-Yale money into farmland and Standard Oil a century ago, you could probably fund an entire Ivy League education today.

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