In my update Monday before the opening bell I made note of the fact that over the weekend it came out that Warren Buffett’s Berkshire Hathaway had purchased over $530 million dollars worth of Barrick Gold and vastly reduced its interested in the banking sector by selling stock in Wells Fargo and Goldman Sachs. What I didn’t know at the time is that Barrick Gold was the ONLY stock that Berkshire bought in the last quarter.
While the stock market went up in the past three months and millions of Robinhood traders piled into this and that stock Barrick Gold was the only buy Buffett made – wow.
Barrick Gold went up Monday 11.63% on this news to show that the Buffett effect is still alive and as real as ever – and gold itself is trading up above $2000. Now investment advisors will feel that they have the permission to tell their clients that investing in gold stocks that are beating the market makes sense and some will even say yes buying gold and silver make sense too in a time when bonds yield nothing and CD’s worth tens of thousands of dollars only drip a few pennies. Take a look at the chart of Barrick Gold.
There are some people that prefer to trade ETF’s over individual stocks. The largest gold stock ETF is the GDX, which I also own. Barrick Gold makes up 12% of that ETF, so the big gain in it helped push GDX up. That is the impact of this stock and the Buffett effect.
I own shares of Barrick Gold myself and have owned them for well over a year. I’m not telling you to buy them now based on the Buffett news. In fact there are individual small cap gold mining stocks in position to go up more than Barrick probably will at this point. What I am saying is that for people that have been watching gold and silver mining stocks go up wondering if they should buy the Buffett news will serve as confirmation to them that this bull market in the metals is for real.
This is a turning point that will FINALLY bring some Americans into the metals markets.
That doesn’t mean there won’t be pullbacks as we saw one last week. And my opinion coming into this week is that we would still see a period of consolidation likely going into September. I talked about this in an interview I did for Ike Iossif of marketviews.tv that you can find here.
But in bull markets the surprises come to the upside as Barrick Gold shareholders saw Monday. Jumping in and out completely in a bull market is also a difficult thing to try to do, because one mistake and you lose your whole position. This is why I just am just holding a core position in gold and silver and mining stocks instead of trying to time every gyration. Instead I spend my efforts looking for new small cap plays in the space.
If you are new to this website and want to understand more about my investing and trading philosophies just grab my book Strategic Stock Trading. You can find it for sale on Amazon.com by clicking here.
-Mike
