Buffett’s Gen Re Sees “Tendency To Higher Gold Prices”

From GoldCore Gold Bullion

Buffett’s Gen Re Sees “Tendency To Higher Gold Prices”

Today’s AM fix was USD 1,706.75, EUR 1,305.35, and GBP 1,058.65 per ounce. 
Yesterday’s AM fix was USD 1,718.00, EUR 1,317.59, and GBP 1,069.67 per ounce.

Silver is trading at $33.55/oz, €25.60/oz and £20.77/oz. Platinum is trading at $1,598.50/oz, palladium at $685.10/oz and rhodium at $1,075/oz.


Cross Currency Table – (Bloomberg)

Gold climbed $2.00 or 0.12% in New York yesterday and closed at $1,715.20/oz. Silver dropped to $33.38 then rose to as high as $33.821 and then retreated, but it still finished with a gain of 0.66%.

Gold fell to its lowest point in a month on Tuesday, briefly touching $1,700/oz after a drop below $1,710/oz triggered some technical selling. 

Investors with a longer time horizon continue to accumulate on the dip and the uncertainty of shaky sovereign economies will fuel continuing diversification into gold.

Yesterday, Australia’s central bank cut interest rates ¼ point to match a record low.  Central banks around the world continue to flood the market with cheap, printed fiat money which will continue to boost gold bullion. 

Platinum group metals have see a rise in the past few weeks in tandem with car sales data, as the metals are used in exhaust catalysts.

Warren Buffett’s General Re-New England Asset Management has warned that until central bank monetary policies around the world change “there will be a tendency to higher gold prices.” 

General Re-New England Asset Management, a unit of Warren Buffett’s Berkshire Hathaway Inc., said gold may advance as businesses temper spending and central- bank stimulus measures fall short.

Gold’s climb last year to more than $1,900 an ounce was fuelled by the expectation that government spending cuts in Europe would reduce demand for goods and services, GR-NEAM Chief Investment Officer John Gilbert wrote in a newsletter posted on the unit’s website today, as reported by Bloomberg.

“There is growing evidence that the rising price of gold is a statement about the discouraging prospects for returns on productive investments,” Gilbert said. 

“We hope that this analysis is wrong. We fear that it is not.”

Gold vs Berkshire, from 1997 – (Bloomberg)

Buffett, 82, has said productive assets like farms and companies will outperform gold over the long term. 

Gold retains some of its appeal to investors even as central banks around the world implement policies to spur investment, Gilbert said.

“Businesses express caution by not making the investments necessary to improve productivity,” Gilbert wrote. It’s not “clear that activist central banks can repeal gravity by encouraging investors to take risk anyway. There will be a tendency to higher gold prices until that changes.”

GR-NEAM had $64.4 billion in unaffiliated assets under management as of Sept. 30. The investment adviser primarily serves insurers.

The European Central Bank has provided the region’s banks with cheap three-year loans and committed to buy the bonds of distressed nations as long as they fix their budgets and reform their economies. The Federal Reserve has kept borrowing costs near zero and expanded its balance sheet to help stimulate the U.S. economy, the world’s largest.

Buffett said in a February letter to Berkshire shareholders that investors should avoid gold, because its uses are limited and it doesn’t have the potential of farmland or companies to produce new wealth. Achieving a long-term gain on the metal requires an “expanding pool of buyers” who believe the group will increase further, he said.

“What motivates most gold purchasers is their belief that the ranks of the fearful will grow,” he wrote. “During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As ‘bandwagon’ investors join any party, they create their own truth -- for a while.”

Buffett and his partner Charlie Munger’s lack of appreciation of gold as financial insurance and bias against gold either shows a significant and potentially costly blind spot. Alternatively, there is an element of “talking their own book” as Berkshire is obviously very exposed to the U.S. dollar, U.S. equities and U.S. banks and the pair may realise the threat that gold poses to their lack of diversification.

The performance of Berkshire Hathaway versus gold since 1996 and since the outset of the financial crisis five years ago (see charts) shows gold’s importance as a hedging instrument and a safe haven in a portfolio.

Buffett deserves the title ‘Sage of Omaha’ and is to be respected but his failure to appreciate gold’s importance as a diversification in a portfolio and his repeated negativity towards gold, in contrast to his father Howard Buffett, will not be judged kindly in financial history.

Gold vs Berkshire, from 2007 – (Bloomberg)

It is never too late to do the right thing and to ensure his legacy Buffett should acknowledge gold has intrinsic value, has utility as money, as monetary asset, a finite currency and as financial insurance in a portfolio.

By acknowledging the truth he will regain much respect, help protect many investors and he may even manage to protect and grow his own and his shareholders  wealth. 

For breaking news and commentary on financial markets and gold, follow us on Twitter.

NEWS

Gold edges down as US fiscal talk uncertainty weighs - Reuters

Gold Falls as U.S. Budget Standoff Outweighs Record ETP Holdings - Bloomberg

Gold Settles Higher at $1,721 on Data, Dollar - CNBC

COMMENTARY

Forget Gold, Silver Gives More for Your Buck: Chartist - CNBC

Gold Is in a Typical Goldilocks Market - Bloomberg

The Best Performing Assets In November And 2012 YTD – Zero Hedge

Comments

[Yellowhoard]

That's ridiculous.

Everybody knows that gold just sits there and you have to hire someone to guard it.

[ParkAveFlasher]

I knew Buffet was a fondler.  In the deepest pits of their vaults, they all fondle it.  All of them, they fondle the precious and smile at the yellow gleam in the candlelight.

[TruthInSunshine]

 There is growing evidence that the rising price of gold is a statement about the discouraging prospects for returns on productive investments,” Gilbert said.  “We hope that this analysis is wrong. We fear that it is not.”

Let me translate: 

Should the KronyKomradeKapitalists that have Deeply Captured all branches of government continue to find innovative new ways to bludgeon the middle class, expand entitlements for the do-nothing class-- from which it has developed a mighty profit center (think J.P. Morgan's 5 billion dollar racket administering SNAP/EBT cards in the U.S. annually, or Cargill's/the farm lobby's/Democratic legislators' taxpayer raping pact to have the USDA overpay for and oversubsidize food crops bought from U.S. farmers, etc.) that's sweeping over even the formerly more reasonable, restrained "developed" nations, expect the painful beatdown of the largest % of actually productive individuals and non-gravy train businesses to continue in merciless fashion, further disincentivizing productivity and work, thus playing directly into the hands of the welfare statist debt/fiat (since these two constructs are the same thing in a full fractional reserve system using fiat backed by nothing but a rhetorical string of words) monetarists, whether they be Paul "There Is No Debt" Krugman, Bill "Let Them Eat iPad3" Dudley, Jamie "Let Them Eat Twinky Batter" Dimon, Warren "We Fuck The Taxpayers Really Hard Can-I-Get-An-Amen Charlie Munger" Buffett, John "Let's Completely Throw Whatever Small % of Our Base That Isn't Hyocritical & Understands How Empires Succumb to Implosion Under The Bus" Boehner, or Barack "Pineapple Express" Obama.

p.s.

Fannie, Freddie Halts Foreclosures For the Holidays

Happy Holidays, bitchez!

[strannick]

But Warren, the Martians are going to be scratching their heads and so perplexed by such comments.

[Oh regional Indian]

Without a three way chart that does Gold/Oil/Dollar any gold price movement is without meaning.

ori

[Enslavethechild...]

I use a 4-way chart that includes lead bullets...

[GetZeeGold]

Chuck Munger.....could not be reached for comment.

[Let The Wurlitz...]

He and Becky Quick are busy.

[azzhatter]

Threesome?

[mdtrader]

Gold trading below its 89 DMA.

[GetZeeGold]

Whatever is a poor girl to do?

[Ralph Spoilsport]

Buffett is a political hack now. He sucks at that also.

[GetZeeGold]

He stopped the pipeline and kept us from buying cheap gas.....I wouldn't laugh at him to hard just yet.

[Ralph Spoilsport]

I'm not laughing at all, but point taken.

[JPM Hater001]

"“What motivates most gold purchasers is their belief that the ranks of the fearful will grow,”"

How about Fuck You Warren

[LongSoupLine]

Buffett and Munger...

Just fucking die you fucking two faced pieces of fucking prune infested shits.

They are the loving trusted uncles who secretly take middle class taxpayers to the basement and fuck them with large garden tools. Fuck you assholes, take Becky Quick with you too.

[youngman]

"Gold’s climb last year to more than $1,900 an ounce was fuelled by the expectation that government spending cuts in Europe would reduce demand for goods and services, GR-NEAM Chief Investment Officer John Gilbert wrote in a newsletter posted on the unit’s website today, as reported by Bloomberg."

So that was the reason...hmmm..sounds a little strange to me...nothing about printing trillions of pieces of paper....

[disabledvet]

The Depression in Europe is just beginning. Competitive "internal devaluations" is not a solution but a recipe for systemic failure. I would NOT short the euro...but "prepare for Life After People" as what they're going through makes what happened to Japan look like a hippie love fest. I think Wall Street THINKS they've got it made...obviously the short term gains on some of these sovereign debt instruments is staggeringly high. But I still believe Bernanke has put the entire financial system on the road to an imminent and MASSIVE default as consumption falls off a cliff and the debt mal-investment is simply too great to compensate for "on the other side of the ledger" via hedging.

[BandGap]

It will be a series of diminishing returns they HOPE will end in a soft crash.

Europe will be burning in 2013. Hey! Did you hear about the WMD in Syria? Watch my hand!

[BandGap]

This is where they lose me. He states that "we hope this is not the case but fear that it is" or something along those lines. What utter bullshit. Just fucking look at the data, state the facts and then interpret them based on your experience and intelligence. Let's stop with the emotional terms like "hope" and "wish" and "fear".  Shut the fuck up and just call them as you see them.

You know, if the world is going to crash and burn I'm guessing most people "hope" it won't.  But if it is, can these people just shed the sugar coated bullshit and state what they reasonably think is happening?

Thank you. Now backl to your regularly scheduled programming.

[jez]

Let's stop with the emotional terms like "hope" and "wish" and "fear".

Exactly so, BandGap. This guy has $64 billion under his management and he's reduced to hoping that he's wrong?

You can't help thinking that he knows very well that his opinion on the gold price will be unpopular over at Berkshire Hathaway, and so he's watering it down as far as he can. In trying to ensure he offends nobody, he makes himself look ridiculous.

[Disenchanted]

In subsequent months, the court proceedings played out in the press. The details gradually emerged about Greenberg’s largest deception: a $500 million deal “in which various AIG insiders staged an elaborate artificial transaction with the Gen Re Corporation,” a major reinsurer owned by Warren Buffet. AIG ostensibly bought $600 million in reinsurance from Gen Re for a $500 premium, indicating a risk of $100 million.[29] However, because Greenberg wanted zero risk exposure, the deal’s “purported terms were all undone” by his staff “in undisclosed side agreements” that rendered the transaction “a sham,” according to the SEC. Papers were altered to distort the nature of the transaction.[30] Buffet’s subsidiary provided records to Spitzer documenting everything. The records showed that AIG’s purpose had been to generate a large tax write-off, in order to make the company look more prosperous than it was. The documents also proved Greenberg’s personal involvement.[31] One of the investigators told the New York Times that the intent may have been “to mask the the activities of murky offshore entities that AIG used extensively during Mr. Greenberg’s tenure at the company.”

In 2006, AIG reached a $1.6 billion settlement with state and federal authorities: the largest ever paid by any financial services company, in US history.[32] In February 2008, four former executives of Gen Re and one from AIG were convicted of conspiracy, securities fraud, mail fraud, and making false statements to the SEC.[33]

It is important to remember that Maurice Greenberg is not some run-of-the-mill hoodlum. As noted, he served as chairman of the Federal Reserve Bank of New York, is a director of the New York Stock Exchange, is the vice-chairman of the Council on Foreign Relations, and is a member of the Trilateral Commission. He also served as vice-chairman of the Center for Strategic and International Studies, and is the Director of the Institute for International Economics, is the Director of the US-China Business Council, the vice-chairman of the US-ASEAN Business Council, the Director of Project Hope, founding chairman of the US-Philippine Business Committee, and, until his forced retirement, was a Trustee of the Asia Society. While this is not a comprehensive list of Greenberg’s credits, it should suffice to lend new meaning to the old adage that scum rises to the top.

quote from:

Black 9/11: A Walk on the Dark Side (Part 3 - Page 3)
 Part 3: AIG and the Linkage to the Drug Trade

Maurice "Hank" Greenberg makes Meyer Lansky look like a piker...and it sounds to me like Buffet and his company were being Greenberg's good little bitches. Yeah I want advice from a crew like that.

[shovelhead]

They hate that they can't siphon off the value that your phys bullion represents.

This is why PM's are 'unproductive'.

[BandGap]

Abso-fucking-lutely.

[Zgangsta]

Wow...Gold threatens to crash below $1700 at the same time silver threatens to crash below $33.

[GetZeeGold]

Bring it bitch.....got a fresh batch of EBTs looking for a home.

[Vooter]

Buffett is nothing more than a standard-issue "America is special" douchebag from Nebraska. FUCK OFF.

[new game]

OK, my office =me myself and I. basically zero overhead. primary investment classes)=p.m. colts and lead.

w.b and b.h. = an army of gub loyalists, fin gurues, cons and scamers(deal makers).

Now for the best; roi comparison; about equel, and in the mean time i have shot some lead, and watched my invrestments

climb in value(direct relation to monetary expansion) with virtually zero headaches(just some timing issues with actual delivery of pm, and the annual headache of carry renewal)...

[Sleepless Knight]

How can you fear something you control the price of?

[jubber]

Both Silver & Gold getting smashed down today,yet again, while the Dollar continues to fall and the Euro soars! very contrarian moves. someone sure don't want prices higher here

[lakecity55]

Q: What's the difference between Corzine, Madoff, and Buffett?

A: One is from Nebraska.

[DavosSherman]

Bernanke is buying 90% of our debt.  Do I really give a shit what some fund runner who is down when priced in gold says?

One chart showing BRK priced to gold is all I need to see.

One chart showing Bernanke monetizing the debt is all I need to see.

One blurb from some asshole fund runner saying everyone should own 5% if their NW in gold and a chart showing that right now only 1% is in gold is all I need to see.

And one more thing: Buffett also said "I was dead wrong that the housing market would recover".  With factual unemployment at 22.8 percent, with 20 million vacant homes in the USA and with an inventory of 8-10 million - we all knew he was fucked in the head to say housing and recovery in the same sentence.

He'll be back to say he was dead wrong about gold.

Who the fuck gives a shit about some has-been like this?

Look, I love Zero Hedge with all my heart - but 871 Captain Obvious words on this?  Not to mention they missed his FU on housing and they missed the other gorillas in the room.

[Anasteus]

Hmm, seems like JPM & Brotherhood is doing well... gold below 1700.

I love them!

There was a discussion here some time ago addressing the Greenspan's opinion on gold. His affinity towards gold was claimed as having been a 'sin of youth' and that he had already changed his mind. That's not true, he didn't. His new quotes published much later

“Fiat money has no place to go but gold.” (Alan Greenspan 2010, The New York Sun)

“Gold, unlike all other commodities, is a currency. And the major thrust in the demand for gold is not for jewelry. It’s not for anything other than an escape from what is perceived to be a fiat money system, paper money, that seems to be deteriorating.” (Alan Greenspan 2011, Bloomberg)

[new game]

because that control requires the compliance of another human being...

[topspinslicer]

I see a tendency for the 800 pound gorilla that is the state and its affiliated central planners wanting to get even bigger and more powerful with nothing standing in their way

[OhOh]

Glad to be a buyer of this ancient relic

[DavosSherman]

+1

The reality currency show, the ONLY currency to survive thousands of years when 3,800 Fiats bit the dust.

[kennard]

"... gold may advance as businesses temper spending and central- bank stimulus measures fall short. Gold’s climb last year ... was fuelled by the expectation that government spending cuts in Europe would reduce demand for goods and services"

Buffett's man has it backwards, intentionally backwards.

Gold rose because of money printing and resulting inflation expections, not because "stimulus measures fall short" and not because "government spending cuts in Europe" are  reducing "demand for goods and services".

In other words, he is blaming austerity for gold's rise. Of course, "austerity" and less "stimulus" is the only way to encourage investment in productive assets and keep the price of gold in check. Making his argument even more absurd, there have never been spending cuts in Europe. It is a mythical straw man argument.

Buffett is just supporting the state intervention (Krugman, et al) case to curry favor with the Obama administration and lead more useful fools/judenrate to the slaughter.

[muppet_master]

buffet = contrarian INDICATOR

he hated gold @ 1200 (actually never owned it from $300, just like he never owned AAPL, but maybe NOW he does own aapl?? = sell !!), but NOW one of his subsidiaries (HIM) loves it @ $1750...also soros said he bought lots of gold in Q3 = freaking idiots !!

buffet buys GS @ $!25 in 2008, then it tanks to $40 = 40 days and 40 nights, LOL !!! (3-2009)

buffet buys BAC, then @ $8.00, then drops to $5.00

i'm sure many, other "wonderful calls"....I AIN'T BUYING ANY GARBAGE COMING OUT OF THE CONTRARIAN INDICATORS !! hopefully buffet will hold his gold until sub $300. ROFLMAO !!!!