Warren Buffett's surprise bet on Barrick Gold has given investors the green light to buy the precious metal, billionaire investor Thomas Kaplan said on NovaGold's third-quarter earnings call this week.
Buffett "effectively detoxified gold" when his Berkshire Hathaway conglomerate revealed a $564 million stake in the gold miner in August, the NovaGold chairman said.
"He's made it safe for anyone interested in gold to be looking at the gold narrative," Kaplan added, according to a transcript on Sentieo, a financial-research site.
Barrick and NovaGold are 50-50 owners of the Donlin Gold project in Alaska, making Kaplan a major beneficiary of a Buffett bet for the second time.
Buffett disclosed his purchase of 130 million ounces of silver in February 1998, legitimizing the metal as an investment shortly before Kaplan took his silver-mining company public. Kaplan personally thanked the investor at a dinner several years later.
Berkshire's Barrick Gold bet was unexpected as Buffett previously dismissed gold as a worse investment than businesses, farms, and other productive assets. The metal is "neither of much use nor procreative," he said in his 2011 shareholder letter.
On the NovaGold call, Kaplan listed several reasons why investors such as Buffett, Ray Dalio and Leon Cooperman — who revealed this week that he bought gold for the first time ever last month — may be flocking to the metal.
Some are seeking to diversify their portfolios, find a haven in rocky markets, and hedge against a weaker dollar, inflation due to government spending, or deflation due to a global economic slowdown, he said.
Others want to escape cash and bonds in the face of rock-bottom interest rates, cut their exposure to corporate bankruptcies and loan defaults, and tap into robust emerging-market demand, he continued.
Supply drivers also support higher prices, Kaplan said. Falling ore grades and yields, fewer explorers striking gold, rising production costs, shrinking inventories, and jurisdictional risks are creating a "perfect storm in gold."