Here’s why I’d follow Warren Buffett and buy the best gold mining shares on the market today

Warren Buffett has decided to invest in a gold mining stock. Here’s why I think UK investors should follow in his footsteps.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Earlier in the week, stock-picking genius Warren Buffett made a move that shocked many investors. He bought shares in the Canadian miner Barrick Gold.

Consequently, the Barrick share price rocketed 15% in a matter of days, as many investors imitated Buffett’s play. But should UK investors follow suit? Let’s take a look at this in more detail.

Analysing Warren Buffett’s recent move

You may be wondering why Warren Buffett’s purchase comes as such a surprise. After all, the price of gold has been on a tear recently and the macroeconomic climate gives no indication of that slowing down. But the answer lies with his previous attitude towards gold.

The investing genius has long been a critic of investing in the commodity. In fact, he’s often directly spoken out against gold. Instead, he prefers pouring cash into high-quality American businesses. With that in mind, it’s clear to see why investors’ ears have pricked up at the announcement.

However, while the purchase is certainly a nod in favour of the commodity’s prospects, it’s important to note that Warren Buffett hasn’t explicitly bought gold. Rather, he’s bought shares in a company that mines gold.

It’s no ordinary company either. Barrick Gold is a titan of the mining industry, with 16 operating sites in 13  countries. The investment case is strong, and the company has good-quality fundamentals. Overall, the underlying business is solid which, in part, explains Buffett’s decision to invest in the company.

What this means for UK investors

Having considered Warren Buffett’s recent move, let’s take a look at the implications for investors situated in the UK. Given the uncertain economic environment, rising US-China tensions and the prospect of a second wave of coronavirus infections, share prices are likely to remain volatile for the foreseeable future. This bodes well for the price of gold to continue to thrive.

However, the commodity doesn’t pay a dividend and its price appreciation is uncertain. Therefore, investors may feel more comfortable approaching gold in a different manner. For instance, by gaining exposure through a mining company, which could even prove to be a superior way to generate favourable returns in the long run.

What’s more, with a vast array of gold mining stocks listed on the London Stock Exchange, British investors are spoilt for choice if they want to emulate Warren Buffett. When pressed for my top pick though, I’d throw my weight behind Polymetal, a top-10 gold producer that’s outperformed most of its peers over the years. With nine gold producing mines located across Russia and Kazakhstan, the company appears set to prosper over the long term.

Alternatively, you could place your money in a fund that’s exposure to most of the best gold mining stocks out there. My go-to would be the iShares Gold Producers UCITS ETF, which has a 9% weighting towards Buffett’s chosen pick, Barrick Gold.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Matthew Dumigan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Recently released: October’s small-cap stock recommendation [PREMIUM PICKS]

We believe the UK small-cap market offers a myriad of opportunities across a wide range of different businesses and industries.

Read more »

Investing Articles

Here’s how a Stocks and Shares ISA and Lifetime ISA could supercharge my wealth!

Individual Savings Accounts (ISAs) can help UK share investors take their earnings to the next level. And their importance is…

Read more »

A person holding onto a fan of twenty pound notes
Investing Articles

A high-yield dividend ETF and an investment trust to consider this November!

Investors wanting to boost their passive income could benefit from investigating these high-yield funds and trusts, says Royston Wild.

Read more »

Investing Articles

2 of my favourite, cheap FTSE 100 growth shares this November!

These FTSE 100 growth shares could be great long-term picks to consider, reckons Royston Wild. At current prices he thinks…

Read more »

Investing Articles

Up 26%, can the BT share price really push higher still?

The BT share price has surged on several catalysts in 2024, but there’s evidence to suggest that the stock could…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

What are the best dividend shares to buy right now?

As shares in B&M European Value Retail have fallen, the dividend yield has reached a 10-year high. Should investors be…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

My favourite FTSE 100 passive income stock that keeps the Christmas coffers full

The holiday season is expensive and can leave many consumers struggling to make ends meet. Here’s how I use a…

Read more »

Investing Articles

The latest growth forecasts suggest the Glencore share price will hit 555p!

Harvey Jones has been disappointed by the performance of the Glencore share price since he bought the commodity stock last…

Read more »