Investing in gold – the bear case
Last week I explored the bullish perspective of investing in gold. As promised, this week I will explore the viewpoints of several gold bears.
Warren Buffet, the renowned American investor and philanthropist, argues that gold is a poor long-term investment because it produces neither dividends nor earnings. Similarly, Charlie Munger, Buffet’s long time business partner, believes that investing in productive businesses that build long term value is superior to holding gold.
John Bogle, founder of Vanguard, echoes Buffet’s and Munger’s thoughts, favouring low-cost, diversified equity investments over gold. Howard Marks of Oaktree Capital also expresses scepticism of gold, stating that it is not a reliable inflation hedge. He argues that although gold may spike during crises, there is little evidence of a consistent long-term correlation with inflation.
This video insight concludes our ‘Investing in gold’ series, in which we’ve explored both the bullish and the bearish perspectives on gold as an investment. So, are you a gold bull or bear?
Transcript:
Hi. I’m Roger Montgomery from Montgomery Investment Management, and welcome to this part two of our two-part series on gold.
We recently posted a video presenting the arguments for a long position in gold. But for every buyer, there is a seller. So, in this video, we’re going to present the arguments against buying gold as presented by highly successful investors known for their scepticism towards the yellow metal. I should note that I’ve limited the scope to investors with proven track records who’ve explicitly opposed gold, ensuring the arguments reflect their insights without any fabrication.
Perhaps the most famous objector is Warren Buffett, one of the world’s most successful investors, and in fact, one of the top five or seven richest people in the world. He’s consistently argued that gold is a poor investment because it doesn’t produce anything. In fact, in his 2011 letter to shareholders, he famously contrasted gold’s static nature with productive assets like businesses or farmland, quoting “if you own one ounce of gold for an eternity, you’ll still own one ounce of gold at its end”. In 2025, with equity markets offering opportunities in growing sectors like technology and renewable energy, Buffett would likely reiterate that gold’s lack of dividends or cash flow makes it inferior to equities, especially when interest rates remain moderate and productive assets are generating returns. And perhaps what we could do there is say, gold is a bet on fear in the short term, but according to Buffett, you don’t want to hold it long term.
An equally impressive investor, who until his recent passing was also Warren Buffett’s right-hand man, Charles Munger, dismissed gold as, “useless”. Famously quipping, that he’d rather “invest in companies that compound wealth over time”. Munger’s stance suggests that capital tied up in gold misses out on higher growth alternatives, remembering again that companies take years to build wealth, and therefore, he’s saying in the long run, you’re better in equities, particularly in equities of growing businesses rather than gold. He’s argued that civilised people don’t buy gold, they invest in productive businesses.
Now, what about John Bogle, who founded Vanguard? He emphasised low cost, diversified equity investments over speculative assets like gold. And before his passing in 2019, he noted that gold’s long-term return has been about 5.6 per cent annualised since 1974, and those returns pale compared to stocks 12.4 per cent for U.S. equities, for example, over the same period. In 2025, with gold prices at new record highs, Bogle’s philosophy is a reminder of the age-old aphorism, the higher the price you pay, the lower your returns. If you’re paying a higher or record price for gold, you might get a lower return than you have in the past. I’m certain he would caution against buying gold’s stagnant value proposition and favour a broad market index fund that captures economic growth or an active fund that specifically invests in the fastest growing companies.
And over at Oaktree Capital, billionaire distressed debt investor Howard Marks, has expressed scepticism about gold’s reliability as an inflation hedge, which is often promoted by the gold bulls. In his memos, he’s noted that while gold might spike during, here’s the word again, short term crises, its correlation with inflation is inconsistent over longer periods. In 2025, with inflation moderating but still above some central bank targets, I wonder whether Marx might argue that Treasury Inflation Protected Securities, or TIPS, might offer more reliable protection, especially as gold’s recent price run up suggest it could be overvalued relative to its historic inflation adjusted performance.
So once again, what we’re looking at is saying, yes, gold might be good as an inflation or a bet against risk or fear in the short term, but longer term, you might not want to be invested in it. Gold’s 2024 performance, up over 28 per cent and near record levels in early 2025, suggest it may be overbought, increasing the risk of a correction. With equities and bonds offering growth and yield, gold’s opportunity cost is stark in a market where productive assets remain accessible and arguably more reasonably priced, particularly after the recent sell off, than they recently have been. In essence, these investors with decades of market beating success argue that gold fails to deliver the growth, income, or reliability that stocks, bonds, or other assets provide over the longer term. And when its elevated prices amplify the opportunity cost, their track records lend weight to a cautious stance on gold.
So, there you have it. In our last video, we presented the bull case, and here in our second part, we’ve presented the bear case. But note, both don’t dispute gold’s, validity as a bet on fear in the short term. Gold prices can spike, but perhaps over the long term, you want to think about taking advantage of volatility in stock markets rather than running for the hills. I look forward to talking to you again with another update on incredibly volatile markets at the moment. We look forward to seeing you soon. And in the meantime, continue to follow us on Facebook and X.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.
Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
