Does Warren Buffett Buy Silver? Will He Buy Precious Metals?

Author: Focus on the User | 8 min read
Warren Buffet's history investing in silver
Warren Buffett has a long history investing in silver.

Warren Buffett is an American investor, businessman, and philanthropist. He is currently acting as the CEO and Chairman of Berkshire Hathaway. It is well known that Warren is a gold bear, but some investors believe that he does not prefer investing in precious metals. Warren Buffet has invested in silver in the past and continues with his company Berkshire Hathaway.

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He started investing from 100,000 dollars 42 years ago and has a value of 21 billion. It might come out as a surprise to those investors that Warren Buffett has invested almost 1 billion dollars in silver based on his value investing principles.

Warren Buffet, at various points, has pointed out that investing in gold is something he does not prefer because he does not see high value in it. According to Warren's value investing principles, investors must only invest in useful and purposeful assets covering one's everyday needs, unlike gold assets. This principle advises investors to purchase undervalued stocks at a low price and then make profits by selling them at higher amounts.

A letter to shareholders published by Berkshire Hathaway stated that Warren was pleased to have invested in silver. Silver had resulted in a gain of 90 million dollars on a pre-tax basis. This pre-tax return resulted in an overall profit of 97.4 million dollars.

Significance of Silver in Day-to-Day Life

All precious metals have immense importance, but silver has numerous benefits in the industrial and medical industries. Silver's non-toxic, antimicrobial nature makes it the perfect metal for water purification and electronics manufacturing. While people may think silver only has one primary use, jewelry, its involvement in cellphones, solar panels, cameras, and computers has been huge.

Warren describes silver as a tangible, industrial metal that has a value that can be recognized. Besides being used in manufacturing a wide range of products, finding a replacement or substitute material for silver in these industries is difficult, giving silver a huge advantage over other precious metals.

Warren Buffett's large investment in the silver market was mainly because it perfectly fitted into his value investing idea. He thought it was the perfect time to purchase the asset as the low silver prices grabbed the attention of financial investors.

Warren Buffett's Strategy on Silver

Warren Buffett's investment has been known to be over 129,710,000 ounces of silver through his share in Berkshire, the company he heads. The company disclosed the biggest news of its silver investment decisions in a press conference in 1997, after which it was speculated that the price of silver dropped immensely after the supply increased rapidly.

The price of silver dropped because large quantities of the metal were being mined. The government had stopped purchasing it, resulting in an oversupply and an increase in the demand for silver as Buffett's investment improved the perception of silver in investors' minds.

After the burst of the silver bubble in the 1980s by oil tycoons Nelson Bunker Hunt and his brothers, the price of silver rapidly decreased from 50 to 10 dollars, portraying silver as a useless investment asset. At that point in time, Warren Buffet took a bet on silver and included it in their investment portfolio. Around 3500 tons of the precious metal were bought in hopes of the US government demonetizing it and changing its company's situation.

Warren Buffett's company stored the purchased silver in London as there were no requirements for reporting financial assets. The transaction could be hidden and kept away from the world without verifying it.

Warren Buffet bought silver at a rate of $6/ounce. Silver Exchange Traded Fund, a new fund, was searching for silver to back up shares to receive SEC approval. Buffet's company let go of its position in silver and sold its entire assets when the price of silver was $7.5 per dollar.

Even though Buffet made a huge return of $1.5 per ounce of silver, several people, including Buffet himself, thought he had sold his stock too soon. Silver's value had risen to more than double the buying price Buffet paid for.

At the Annual Meeting of Berkshire Hathaway in 2006, Warren Buffet was asked about the silver assets in their fund, to which he responded by saying that the company once owned a lot of silver. Still, they bought it early and sold it early as well.

Even though the shareholders of the company did not resent a profit of almost $500 million, Buffet's statement showed that he did not view silver as a valuable and purposeful asset anymore and was not keen on buying silver then.

Why Does Warren Buffett Not Invest in Gold?

Warren Buffet does not invest in gold as he has stated he follows his value investing principle, which allows for only valuable assets that fulfill one's practical needs.

The usefulness requirement set by Buffet is not met by gold, regardless of having high industrial demand. In the Annual General Meeting held in 2005, Warren stated that gold is a bad investment and was on the lower end of the list of ways to store value. He would prefer investing in an index fund, an apartment, or land than investing in gold.

During the outbreak of the Coronavirus pandemic, the financial investors expected that history would repeat itself, but this time in gold as well. Even though there was no confirmed news, gold and silver were considered viable investments, which is why Buffett was eyeing stockpiling gold and silver during the pandemic.

He believed he would help him get another boost from his company through his value investing strategy as the price of gold and silver decreased significantly. Value investors have always benefitted during times of turmoil, which is why investors believed the pandemic was an excellent opportunity to make profits. These are the best silver mints you can consider buying silver bullion from.

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Disclaimer: Content on this website is not intended to be used as financial advice. It is not to be used as a recommendation to buy, sell, or trade an asset that requires a licensed broker. Consult a financial advisor.

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