Gold prices have reached unprecedented levels in 2025, driven by a combination of inflationary pressures, economic uncertainty, and growing concerns over the Federal Reserve’s independence. This surge has led both individual investors and central banks to increase their gold holdings as a hedge against these prevailing risks. However, renowned investor Warren Buffett has consistently expressed skepticism regarding gold as a viable long-term investment.
Buffett’s criticisms of gold are well-documented. In his 2011 shareholder letter, he described gold as lacking practical utility or the ability to create wealth over time, stating that it does not produce cash flow. He has characterized gold as an asset that flourishes in times of fear, pointing out that its price is heavily influenced by market sentiment—demand increases amid economic anxiety but diminishes when confidence returns. This perspective underscores Buffett’s preference for investments that generate income and compound value over the long term.
In a surprising move during the second quarter of 2020, Berkshire Hathaway revealed a $565 million stake in Barrick Gold Corp, one of the world’s largest gold mining companies. This decision, though unexpected given Buffett’s views, may have originated from the company’s portfolio managers rather than Buffett himself. Nonetheless, it marked a significant moment in the investment landscape. However, the investment was short-lived, with Berkshire divesting its shares in Barrick Gold by the end of 2020.
The current rise in gold prices contrasts sharply with the relatively stable and low-inflation environment experienced at the onset of the COVID-19 pandemic. As of July 2025, inflation is at 2.7%, escalating to a 2.9% annual rate in August. This elevated inflation has made gold a more appealing option for investors seeking safe havens amid economic turbulence.
While Buffett generally avoids gold, there are cases when it could be considered within a portfolio. Investment strategists suggest that allocating a small portion of assets to gold can be beneficial for diversification, particularly as a safeguard against market volatility. Certified financial planner Laura DiFiglio recommends a portfolio allocation of 90% in stocks and bonds, with up to 2.5% in gold as a hedge against inflation for growth-focused investors.
As for the long-term perspective on gold, it is essential to consider opportunity costs and current market dynamics. Gold is often seen more as a hedge against inflation than a growth vehicle, suggesting that allocations should remain modest and aligned with one’s risk tolerance and investment horizons.
Ray Dalio, founder of Bridgewater Associates, also weighs in on gold’s defensive role in a portfolio. He advocates for a 10% to 15% allocation to gold, suggesting it can provide protection amid financially unstable markets burdened by debt.
In summary, while Buffett maintains his stance that gold is a nonproductive asset lacking income generation, the recent price spikes might attract investor interest. However, long-term wealth creation is built on assets that produce income and compound over time. Gold may serve a hedging function, but it should not replace a structured, value-driven investment strategy.
