Buffett's investment wisdom on gold questioned

Warren Buffett is a great investor, but had got it wrong when it came to gold, says Christopher Goolgasian, vice president at State Street Global Advisors Inc, which markets a $74-billion gold fund.

He said in a 2 March regulatory filing of SPDR Gold Trust, an exchange-traded fund managed by Boston-based State Street Corp (STT) that while he would not own gold he also never owned Apple (up around 1,500 per cent since January 2000) nor Google (up 530 per cent since August of 2004).

Goolgasian, wrote that while Buffett's Berkshire Hathaway Inc was up 105 per cent since January of 2000, gold had surged nearly five-fold during the same period.

The legendary investor, in his annual letter to shareholders last month, advised them to avoid gold given its limited uses as it did not have the potential of farmland or companies to produce new wealth. He added, getting a long-term gain on the metal required an ''expanding pool of buyers'' who believed the group would increase further.

''What motivates most gold purchasers is their belief that the ranks of the fearful will grow,'' Buffett wrote in the letter, posted 25 February on the company's website. ''During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As bandwagon investors join any party, they create their own truth -- for a while.''

In his note, Goolgasian, called Buffett, ''the greatest investor of our time,'' but that did not stop him from questioning Buffett's investment wisdom on the yellow metal.