In a surprising move by billionaire investor Warren Buffett, who is known for his distaste in gold investments, his company Berkshire Hathaway announced that it had purchased a stake in one of the United States' largest mining companies. The company revealed late last week that it had bought an undisclosed stake in Barrick Gold.
The share prices of the country's top miner surged by more than 12 percent, jumping from a close of $26.97 per share on Friday to a $29.66 per share opening on Monday before closing at $30.13. Shares of rival gold mining companies, Newmont, Yamana, and AngloGold Ashanti, also surged the same day.
Berkshire Hathaway's investment in Barrick Gold comes as global gold prices have hit record highs this year. Spot gold briefly breached $2,000 per ounce earlier in the month before pulling back below the mark. Positive economic indicators have managed to improve global sentiments, halting the months-long rally of global gold prices.
The stake purchase came as a surprise for most given Buffett's disdain for investing the traditional safe-haven asset. The so-called Oracle of Omaha has said that investing in companies was significantly better than investing in the commodity. In a note published during Berkshire Hathaway's 2011 annual shareholder's meeting, Buffett stated that investors will never be able to make any gains if they held on to gold in the long-term.
It has to be noted that Berkshire did not purchase actual gold. Instead, it has purchased a partial stake in a company that mines the commodity. This means that it does not technically go against Buffett's investment principles. Although, Barrick Gold's performance does directly coincide with the rise and fall of global gold prices.
The rationale behind the stake purchase still remains unclear. It also isn't certain if the decision to purchase the stake came from Buffett directly or if it was from one of his top investment executives. Buffett's two lieutenants, Berkshire executives Ted Weschler and Todd Combs, aren't as opposed to gold investments as their boss.
Berkshire Hathaway has managed to report a rebound in earnings for its second quarter after posting a loss in the first quarter. Since the start of the year, the company's shares have declined by 8 percent, a respectable performance given the disruptions caused by the coronavirus pandemic on the company's massive portfolio of companies.
