Valuation Expert Agrees with Warren Buffett: Gold is a Collectible, Not a True Asset
In 2025, as the price of gold soared past $4,300 per ounce, a prominent valuation expert, Aswath Damodaran, reaffirmed a perspective long held by Warren Buffett: gold is not a genuine financial asset. Damodaran's analysis underscores the fundamental difference between assets that generate income and those whose value is primarily determined by market sentiment and perception.
Professor Damodaran, a finance lecturer at NYU's Stern School of Business, supports Buffett's core argument that gold cannot be valued in the same way as traditional financial instruments like stocks or bonds, precisely because it does not produce cash flows. He categorizes gold as a "collectible," suggesting its market price is largely influenced by prevailing moods and speculative trends rather than any inherent productive capacity. This view aligns with Buffett's well-known reluctance to invest in gold, which he famously articulated by stating it yields nothing and is therefore not a true investment.
Damodaran further elaborated that while assets such as real estate or corporate stocks provide financial returns, gold functions more like an antique painting or a rare trading card, where its worth is dictated by supply and demand dynamics in a specialized market, rather than its intrinsic utility or cash-generating potential. He drew a parallel by noting that one cannot rationally price a Picasso based on future earnings, but rather on what buyers are willing to pay for its rarity and desirability. This perspective emphasizes that gold's status is more akin to a commodity or a historical artifact than a productive capital asset.
Despite gold's significant appreciation, including a 50% increase in 2025, Damodaran attributes this surge to broader economic uncertainties and a perceived erosion of trust in central banking institutions. He acknowledged gold's historical uses as a commodity for luxury items or even as an alternative currency, but maintained that its primary allure remains rooted in its perception as a reliable store of value during times of instability. However, he cautioned investors that relying on gold solely for its price appreciation in a volatile market is fundamentally different from investing in assets with predictable cash flows. He pointed out that, over the long term, gold's returns have historically underperformed stocks, which are backed by tangible earnings and growth potential.
Ultimately, the discourse from both Buffett and Damodaran highlights a crucial distinction for investors: understanding whether an asset is intrinsically productive or merely a speculative item. Their shared viewpoint suggests that while gold may offer short-term gains driven by market psychology, it fundamentally lacks the wealth-generating characteristics that define true financial investments.