Gold has been on a strong run.

Over the past couple of years, gold prices have climbed sharply and grabbed headlines, prompting renewed interest from investors. When an asset posts eye-catching returns, it naturally attracts attention — and gold is no exception.

Gold has fascinated humans for thousands of years. It has been worn, stored, traded, worshiped, and fought over. And during periods of market stress or inflation fears, interest in gold tends to surge even further.

Rather than approach gold emotionally, the wiser path is to evaluate it the way long-term investors evaluate any asset:

What does it produce? What role does it play? And how does it help build real wealth over time?

Few investors have framed this more clearly than Warren Buffett.

Gold as a “Belief Asset,” Not a Productive Asset

Buffett’s core observation is simple: gold produces nothing. It generates no earnings, no cash flow, no rent, and no dividends. Its value depends almost entirely on the belief that someone else will desire it more in the future.

In other words, gold’s price is driven primarily by sentiment—not by economic output.

Buffett has also described gold as a fear asset—one that tends to rise when investors are worried about paper currency, government policy, or financial systems. Many gold purchases are motivated by the belief that fear itself will grow.

He often references an old proverb:

“What the wise man does in the beginning, the fool does in the end.”

Chasing assets primarily because they are popular during moments of anxiety has rarely been a durable wealth-building strategy.

The Cube of Gold vs. Productive Assets

Buffett once offered a powerful thought experiment in his 2011 Berkshire Hathaway Shareholder letter:

If all the gold in the world were gathered into a single cube, its value would run into the trillions of dollars. With that same money, you could instead buy:

All U.S. farmland

Plus multiple world-class companies such as Exxon Mobil

And still have capital left over

One pile sits there.

The other produces food, energy, innovation, jobs, and cash flow year after year.

A century from now:

Farmland will still be producing crops.

Businesses will have paid enormous dividends and grown their assets.

The gold cube will be unchanged—and still incapable of producing anything.

You can hold it. You can polish it.

But it will not create value.

Buffett’s conclusion is straightforward: over long periods, productive assets should compound far more than non-productive assets like gold.

A Real-World Example: Gold vs. the Dow Since 1980

In 1980, during a period of high inflation and economic stress, gold reached a major peak. Around that same time, the Dow Jones Industrial Average traded near similar numerical levels.

In simple terms:

Around 1980, one ounce of gold could buy roughly one unit of the Dow.

Fast forward more than four decades:

The Dow now stands many multiples higher than its 1980 level.

Gold is higher too—but nowhere near the magnitude of growth experienced by stocks.

And this comparison still understates the advantage of stocks.

Why?

Because stocks pay dividends.

Over decades, investors in U.S. stocks have received a steady stream of cash that could be reinvested to buy more shares, compounding returns even further. Gold provides no such cash flow.

This reinforces Buffett’s central point:

Owning productive businesses has historically built far more wealth than owning a store of value whose price depends mainly on sentiment.

A More Rational Investment Philosophy

A reasonable long-term investment philosophy starts with a simple premise:

Own assets that participate in human progress.

In the future, people will move more goods, consume more food, require more housing, and rely on more services than they do today. Well-run companies participate directly in that growth.

Gold does not.

That’s why we disagree with the idea that gold is a necessary long-term portfolio hedge. Hedging every fear often leads to owning assets that feel comforting—but quietly reduce compounding.

A Clear-Eyed View of Gold’s Tradeoffs

If someone chooses to own gold, it’s important to understand what comes with it:

No income

Less favorable tax treatment than stocks

Meaningful volatility

Long-term returns that have generally lagged productive businesses

Put simply:

Owning gold means accepting no cash flow, higher tax friction, a bumpier ride, and long-term growth that has historically trailed stocks.

That may still be a personal choice—but it should be an informed one.

Bottom Line

Gold can be emotionally appealing.

Productive assets are economically powerful.

While gold may shine during periods of fear, real wealth is built by owning assets that create, adapt, and compound over decades.

That is why we design portfolios to harness global growth rather than attempt to hedge every possible future outcome.