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Why Warren Buffett’s company is buying shares of a gold mining company

Gold prices have gained 24% this year, and likely to score more gains.

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Warren Buffett’s Berkshire Hathaway Inc has bought a new 20.9 million shares in Toronto-based Barrick Gold Corp, one of the world’s largest mining companies.

This was disclosed in a regulatory filing detailing its US-listed investments as of June 30, 2020, according to Reuters.

Meanwhile, it has minimized some of its investments in America’s top banks. This includes America’s most valuable bank, JPMorgan Chase and other leading financial brands like Wells Fargo & Co and eliminating a stake in Goldman Sachs Group Inc.

READ MORE: Gold rockets above $1850 as it continues 9-year high

Why Warren Buffett might be investing in Gold now?

Gold prices have gained 24% this year, and look likely to score more gains in the coming weeks.

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The likely reason Warren Buffet might be buying shares of Barrick Gold Corp is related to the macro that quantitative easing isn’t helping enough to calm the global financial markets. This is coupled with exhausted fiscal policies that include tax breaks, tax holidays, and cash credits to low-income families, have done little in stabilizing the world’s fragile economy.

Also, global inflation levels are on the upside, and that seems to be good news for a deflationary asset like gold.

READ MORE: Twitter CEO, Dorsey may be replaced after four years

In addition, the resurgence of COVID-19 has heightened geopolitical uncertainty pushing precious metal higher, gold traders believe that the present record levels of gold might just be the norm, as more stimulus packages find its way to an already over-bloated financial system.

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Investors usually monitor Berkshire’s quarterly filings to see what Warren Buffett and his portfolio managers are investing in.

Olumide Adesina is a France-born Nigerian. He is a Certified Investment Trader, with more than 15 years of working expertise in Investment trading. Follow Olumide on Twitter @tokunboadesina or email [email protected] He is a Member of the Chartered Financial Analyst Society.

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Commodities

Gold prices suffer worst two weeks in a row since November

Gold futures prices at their most recent trading session settled at $1,829.90 an ounce, down by 1.2%.

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Nigeria Mining Sector shows growth prospect despite low bank credit provision, Gold hits eight-year high as global recession sentiments strengthened, Gold hits three weeks high, Investors rush to gold, Gold Future Drops to $1727.80 as Tensions Escalate between America and China, Precious metals slump, investors focus on Central Bank’s intervention, FG inaugurates gold refinery project in a landmark event

Gold prices suffered significant losses at their most recent trading session.

The yellow metal lost its shine at the expense of charging U.S dollar, whose surge of late astonished many investors amid the currency debasement expected from the U.S President-elect’s proposed $1.9 trillion COVID-19 support programme.

READ: Gold suffers worst monthly drop in four years

What you should know

  • Gold futures at their most recent trading session settled at $1,829.90 an ounce, down by 1.2%.
  • Although the yellow metal’s recent loss on a weekly basis moderated to just 0.3% on the week, that loss added to the previous week’s plunge of 3.2% — handing gold its worst two weeks in a row since November.
  • The greenback was an outlier at the last trading session despite drops seen in U.S bond yields associated with the benchmark 10-year U.S. note, whose resurgence in the previous week had been the catalyst for the U.S dollar comeback.

READ: Copper hits six months high, Industrial demand spur bullish run

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, gave insights on the odds weighing on the yellow metal in the near term.

Specta
  • “With short dollar trades tempering over the great US dollar debasement story of 2021, it’s not such an easy glide path for gold to start the year. So, I suspect gold remains tied to the hip of the US dollar fortunes this quarter. The market then morphs into “sell the rally mode” as the US economy recovers tangentially to the vaccine distributions.”

READ: Silver surpasses three-week high, joins Bullish momentum

Bottom line

Investors are increasingly confronted with the reality that the pandemic is still far from being under control, thereby flocking back to the safe-haven currency despite the significant progress that was made in the past few months, and several COVID-19 vaccines already in the market.

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Commodities

Oil prices suffer worst trading loss in a month

Oil prices were under pressure on fears of recent lockdown measures sighted in China.

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Crude Oil worker, OPEC, oil prices, Bulls hit back to support US crude oil amid panic sell- offs in global equity markets, Nigeria’s local oil players smashed by low crude oil prices

Crude oil prices suffered their worst trading loss in a month, tumbling by more than 2% at Friday’s trading session.

Oil prices were under pressure on fears that recent COVID-19 lockdown measures sighted in the world’s largest buyer of crude oil, China, could in the coming days exhibit weakness in energy demand.

What you should know: A strong U.S dollar, the currency on which crude oil is primarily sold, made purchasing of the commodity less competitive for holders in other currencies like the Euro, Japanese yen, thereby weighing on oil prices

  • U.S based oil contract, West Texas Intermediate futures, plunged by 2.2.% to settle at $52.36 per barrel. It is the oil contract’s biggest one-day drop since December 18, although it rounded out the week with a 0.5% upsides.
  • The British-based oil contract, which is the global benchmark for crude, settled down $1.32, after losing 2.3% at $55.10. For the week, Brent crude prices lost about 1.6% in value.
  • The world’s second-largest economy ramped up lockdowns yesterday, after reporting the highest number of daily Covid-19 cases in more than 10 months.

China capped a week that has resulted in more than 28 million people under lockdown as it suffered its first COVID-19 death on the mainland since May.

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke on the prevailing macro conditions keeping oil prices relatively high, taking into account Saudi’s recent pledge to curb production, and the influx of COVID-19 vaccines to tame the ravaging virus:

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“With Saudi Arabia providing the cornerstone and bridging the gap to vaccine oil market lift-off. With the renewed enthusiasm about the US demand recovery due to the prospects for more stimulus and the new administration’s pledge to focus on the vaccinations’ rollout, oil prices are lifting higher locking to hash out higher ranges.”

What to expect: Oil traders are entering a critical phase as oil remains sensitive to the news, with negative implications for the demand recovery.

The oil market recovery is vital for blunting the effect of higher nominal US Treasury yields through the reflationary channel. If oil doesn’t fly higher, the reflation trade could fall flat on its face.

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Commodities

Oil drops amid strong import data from world’s largest buyer

Oil prices are under pressure, and recent customs data reveal that crude imports into China were up 7.3% in 2020.

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Oil prices drifted lower at the last trading session of the week. Surprisingly oil prices are down in spite of strong import data from China on the bias that the recent COVID-19 outbreak in the world’s largest crude oil importer has led to major lockdown measures.

READ: Oil prices rally up as market looks to OPEC+ meeting

What you need to know

  • At the time of writing this report, Brent oil futures were down by 0.32% to $56.24 a barrel, and the West Texas Intermediate futures down by 0.11% to $53.5o a barrel.
  • Oil prices are under pressure, and recent customs data reveal that crude imports into China were up 7.3% in 2020.

READ: FG borrows N2.8 trillion from CBN via Ways and Means

Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics, spoke on the prevailing macro conditions keeping oil prices relatively high, taking into account Saudi’s recent pledge in curbing production and the influx of COVID-19 vaccines to tame the ravaging virus in causing more harm;

“Oil prices are higher rising to a fresh ten-month high on stimulus expectation as consumers could spend a portion of the direct deposit on gasoline purchase.

Specta

READ: Nigeria’s Bitcoin peer to peer trading for 2020 is $352 million

“But it’s perhaps the infrastructure component of the US stimulus efforts that will resonate bigger given the current COVID19 concerns that are pushing back on gasoline demand.

“And with Saudi Arabia providing the cornerstone and bridging the gap to vaccine oil market lift-off. With the renewed enthusiasm about the US demand recovery due to the prospects for more stimulus and the new administration’s pledge to focus on the vaccinations’ rollout, oil prices are lifting higher locking to hash out higher ranges.”

READ: Nigeria’s GDP growth to rebound between 1.7% and 2.0% in 2021 – United Capital report

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What to expect;  Oil traders are entering a critical phase as oil remains sensitive to the news with negative implications for the demand recovery.

  • The oil market recovery is vital for blunting the effect of higher nominal US yields through the reflationary channel. If oil doesn’t fly higher, the reflation trade could fall flat on its face.

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