(Kitco News) – The gold market is seeing renewed excitement as investors continue to react to the news that Warren Buffett’s Berkshire Hathaway bought nearly 21 million shares of Barrick Gold in the second quarter.
However, one market analyst is warning investors to not read too much into the move as it probably doesn’t reflect a notable transformation in sentiment from the Oracle of Omaha. In a note Monday, Marc Chandler, chief market strategist at Bannockburn Global Forex, said that “pump” margins in the mining sector is what drove the investment decision.
“Investors ought not to confuse gold mining companies with gold bullion,” he said.
Chandler also said that gold bulls should also note Berkshire Hathaway’s Barrick bet compared to its overall holdings.
“Berkshire Hathaway’s portfolio is still dominated by Apple (~44%). Barrick Gold accounts for less than 0.5%,” he said.
Although Chandler doesn’t see Buffett’s latest move as a game changer for the gold market, he remains bullish on the yellow metal as he expects the U.S. dollar to enter a long-term downtrend.
In an interview with Kitco News last month, Chandler said that a $2,000 target for gold could prove to be a conservative estimate in the near-term.
Buffett has had very opinionated views on gold as an investment.
“(Gold) gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head,” he said in 1998 in a speech at Harvard University.
