Why Did Warren Buffett Sell $56 Billion Worth of Stocks in 2020 and Then Turn Around and Buy Gold?

Warren Buffett, whose net worth is around $100 billion, is known as one of the world’s top investors. He’s also well known for his disdain towards gold. Over the years he’s made a lot of public statements criticizing the precious metal.

Here’s a few of those statements:

“It 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.”

— Buffett, Harvard University, 1998

“I have no views as to where gold will be (in the next five years), but the one thing I can tell you is it won’t do anything between now and then except look at you.”

— Buffett, CNBC’s Squawk Box, 2009

“Gold … has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these
purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end.”

— Buffett, letter to shareholders, 2011

So Why Did He Buy $560 Million of Gold Then?

Buffett didn’t publicly admit to buying gold.

Instead, the news broke after investors analyzed Berkshire Hathaway’s 13F filing in August, revealing he made a significant investment in gold (GOLD), to the tune of $560 million.

This sent shockwaves through Wall Street as Buffett has been such an outspoken critic of gold his entire career. It also raises an alarming question:

“Why is the man, who has lived through five decades of stock market ups and downs, liquidating so many stocks and investing in gold?”

Many experts believe this is a strong sign Buffett believes the market will crash hard in 2021.

And even though he hasn’t publicly stated this (probably because he doesn’t want his own shareholders selling all their stocks)… he has revealed the one indicator he trusts above all others to gauge the health of the market.

“The Buffett Indicator”

The technical term is the “market cap to gross domestic product (GDP) indicator” but Wall Street insiders simply know it as the “Buffet Indicator.”

It’s an indicator many top investors use to gauge whether the market is undervalued, fair valued or overvalued. It’s measured by dividing the collective value of a country’s stock market by the nation’s GDP.

And the higher it is, the more the market is overvalued.

And the more overvalued the market is, the closer we are to the next crash.

As of March 1, 2021 the Buffett Indicator is at an alarming 193%, which means the stock market is “significantly overvalued.” To put this in perspective, it’s currently more overvalued than it was right before the Dot Com Crash in 2000 (see above).

So while the masses are celebrating the miraculous “V-Shaped” recovery and buying stocks in Tesla, GameStop and Apple… seasoned investors are unloading stocks by the billions and preparing for the economic tsunami triggered by the major financial quake of 2020.

Click here to learn more about what this means for you if you have more than $100,000 invested in the stock market or your 401k.

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