Warren Buffett Doesn't Buy Gold. Over the Past Decade, That Would Have Been a Mistake.

— Unless you could do what he does.

A More Balanced Way to Read Buffett on Gold

Gold isn't a bad investment per se. Looking at the past decade, it would be disingenuous to say otherwise.

If a retail investor put money into gold in 2016 and simply held on, the outcome would have beaten many of the most common choices available to them—including broad index funds and several large, well-known blue chips. In a period marked by monetary expansion, inflation anxiety, and geopolitical stress, gold did what it has always done: it preserved and re-priced purchasing power.

So when Warren Buffett says he doesn't invest in gold, the point isn't that gold "doesn't work." It clearly did.

The distinction Buffett is making is a conditional one.

Gold performs well when fear, uncertainty, and currency debasement dominate. Great businesses perform well when capital is allocated intelligently over long periods of time. Buffett's philosophy isn't flawed—it prioritizes compounding productivity over speculative preservation. Gold won the battle against passive benchmarks this decade, but lost the war against intelligent business selection.

The catch—and this is where Buffett's view becomes less practical for many retail investors—is that spotting undervalued, high-quality businesses in advance is difficult. It requires judgment, patience, and the willingness to look wrong for long stretches of time. Not everyone can do that consistently, and not everyone wants to.

For many retail investors, a 10-year holding period already is "very long-term." Over that same decade, if one simply bought what was popular or obvious—a broad index fund, or well-known large caps—gold would, in fact, have come out ahead.

What the Numbers Actually Show

Here's what $1,000 invested in January 2016 (10 yrs) and 2021 (5 yrs) would have grown to by February 2026:

The spread tells a clear story:

I didn't include the NVIDIAs or Palantirs here—luck aside, you get my point. These are simply examples of what disciplined business evaluation can uncover when applied systematically.

Gold beat the most common passive choices. It outperformed the S&P 500 by roughly 2.4 percentage points annually and more than doubled the STI Index's annual return.

But stock-picking crushed gold. Food Empire delivered nearly double gold's annual returns. DBS Group wasn't far behind. Even The Hour Glass, despite its narrower moat and premium valuation, kept pace with gold while reinvesting capital into expanding store networks and inventory.

Food Empire's result reflects a small-cap re-rating and operational inflection—it shows what systematic evaluation can identify, not what every stock delivers.

The question isn't whether gold works. The question is: Can you systematically identify the Food Empires and DBSes before they deliver 23-30% annual returns?

The Conditional Logic Behind Buffett's View

Buffett's argument only really dominates when two conditions are met:

1. You can identify great businesses before they are fully priced.
2. You are willing to hold them through cycles, boredom, and drawdowns.

When those conditions are met, ownership beats insurance. When they aren't, gold has proven it can be a perfectly reasonable alternative.

Of course, the next 5-10 years could look entirely different. Gold could crush equities in a currency crisis. The S&P 500 could deliver 20% annually if AI lives up to its hype. The point isn't to predict which asset class "wins"—it's to have a framework for evaluating what you own and why.

Buffett doesn't avoid gold because he's a perma-bull on stocks. He avoids it because he's built a systematic way to evaluate business quality—and he trusts that framework more than he trusts macro forecasting or inflation hedging.

The retail investor's challenge isn't replicating Buffett's stock picks. It's replicating his thinking process:

• What does this business actually do to create value?
• Can management allocate capital intelligently?
• Is the financial position strong enough to survive stress without diluting shareholders?

If you can answer those questions consistently, you don't need gold. If you can't, gold becomes a reasonable default.

What This Means for You

Data Sources & Methodology