That’s a direct quote from the father of arguably the most important man in all of modern finance. It’s been repeated by precious metals investors for decades, and it was probably not a new idea when Howard Buffett (Warren’s father) said it, back in 1948.
As far as I know, it’s not disputed by anyone.
The architect behind all paper money policy, John Maynard Keynes famously quipped, “in the long run, we’re all dead.”
He wrote that line in 1923 as a wry response to critiques of his theories. The theories stated that inflating the currency (printing money, etc.) was not just acceptable, but desirable and advantageous to even out the ups and downs of normal market activity.
And it’s true, “the long run” is by definition some far-off time. But the long run comes eventually, and it is cold comfort for Americans who have seen the value of their paper dollars dwindle by more than 95% since Keynes wrote those words 102 years ago.
Now, it seems the long run is here, and Howard Buffett was correct.
What else would you call a 95% decline in purchasing power in 100 years if not a collapse? Do we have to wait for it to get to 99% or 100% before it’s a “real” collapse?
Buffett was speaking to his peers in Congress – practically begging them to re-center gold as the unit of account for the Federal Government. He wanted to tightly tie dollars to gold, going back to a strict gold standard that was abandoned by President Franklin D. Roosevelt in 1933.
Up until that point in Buffett’s lifetime, he’d already seen the purchasing power of the dollar erode by over 40% in just 35 years.
Worse still, FDR also effectively banned the private ownership of gold for American citizens. They couldn’t go buy gold bars or coins to protect themselves from continued dollar depreciation.
Thankfully, that ban ended in 1971 when President Richard Nixon officially ended the gold standard entirely. We can own gold now.
While Warren Buffett has been famously critical of gold, I believe we’re about to find out that Berkshire Hathaway bought shares of a gold major in Q1 2025. We’re just one day away from Berkshire publishing their 13F (the SEC form that discloses ownership for holding companies)
Click here to see how you can profit before this filing is released tomorrow.
There’s an escape hatch from the continued collapse of the US dollar, and people are waking up to it. People are buying record amounts of gold at Costco, to the point that Wells Fargo estimates the bulk retailer is making as much as $200 million every month from gold bar sales alone.
A headline yesterday on Yahoo Finance read: “Costco is limiting gold bar purchases as demand surges.”
At the same time, large institutions are also buying gold, hand over fist.
Forbes recently reported, “In the first quarter of this year, central banks added 244 metric tons of gold to their official reserves, according to the World Gold Council. That’s 24% above the five-year quarterly average.”
And if you’re wondering how this gold bull ends, we have a long data series that gives us an idea.
The Dow-Gold ratio shows the relative value between gold and American stocks. No major gold bull has ended until that ratio dipped below ~7, and most falling well under 5:
Today the ratio is above 10. I don’t think this bull ends until it’s closer to 5 or maybe even lower. As the ratio falls, it shows gold outperforming stocks – and as you can see the ratio is dropping off a cliff right now. The gold bull of the 1970s didn’t end until gold and the Dow were almost at parity.
The situation was so bad for stocks (and great for gold) in 1979 that Business Week published a now infamous cover, with a headline that seems bizarre in hindsight: “The Death of Equities.”
Of course, that was the single best time in the past 70 years to buy stocks, and it preceded a 15 year era of flat returns in gold.
But it shows the kind of herd mentality people were in back then. Everyone was buying gold in 1979 and 1980 – and the sentiment for stocks was rock bottom. We’re not there yet for gold or stocks.
There’s still room to run. And more importantly, we’re still seeing gold stocks that are massively undervalued. There’s lots of time left in this bull market for the metal, but gold stocks right now are selling at a historic discount. That won’t last.
Best,
Garrett Goggin, CFA, CMT
Chief Analyst and Founder, Golden Portfolio
P.S. Tomorrow, I expect to see a headline about how Warren Buffett’s holding company, Berkshire Hathaway, bought shares of a major gold miner in Q1 of this year. I believe this will kick off a buying frenzy in specific gold stocks. Click here to see how I think it will play out.