Warren Buffett vs. Indian grandmothers: Who wins the great gold debate

The same gold that our grandmothers quietly tucked into steel almirahs and smaller trunks, has turned into the loudest performer in the country. Prices have rocketed past Rs 1.4 lakh for 10g, after touching a record near Rs 1.69 lakh earlier this year. Dinner table talk has shifted from stocks to gold.

And in the middle of all this noise sits a 95-year-old man in Omaha who has spent decades telling the world that gold is, in his blunt words, USELESS.

Warren Buffett has never owned an ounce of it as a wealth plan. He has mocked it, joked about it, and warned people away from it. Yet here we are, in a year when gold has humbled the stock market. So, who is right? The Oracle, or our grandmother?

Full disclosure, this is not a recommendation or a verdict on what is better and what is not. This is just an opinion on what made Buffett stay far away from gold his entire investment career.

Why the Oracle of Omaha Gets Gold Wrong

Buffett’s most famous line on gold came in a 1998 talk at Harvard. He said gold gets dug out of the ground in one part of the world, melted, then buried again in a vault while people are paid to guard it. “It has no utility,” he told the students. Then he added the kicker. “Anyone watching from Mars would be scratching their head.”

Read that again. A Martian, looking down, would not understand why humans dig up metal only to lock it away. That is the whole Buffett case in one joke.

He turned the joke into a framework in his 2011 letter to Berkshire Hathaway shareholders. There, he split every investment on earth into three buckets. First, things tied to a currency, like bank deposits and bonds. Second, assets that produce nothing and simply sit there, hoping someone pays more for them later. Gold is the king of this second bucket. Third, productive assets such as farms, real estate and businesses that actually make something every year.

Buffett’s problem with gold is simple. It just sits there. In his words, it is “neither of much use nor procreative.” A farm grows crops. A factory makes goods. A bank earns interest. Gold does none of that. If you own one ounce today, you will own exactly one ounce in a hundred years. It will not have multiplied, paid you a single rupee, or done a day of work. As he put it, “you can fondle the cube, but it will not respond.”

The 68-Foot Cube: Buffett’s Mathematical Case Against Non-Productive Assets

That cube is worth pausing on, because it is the sharpest thing Buffett has ever said about gold.

He once asked readers to imagine melting all the gold ever mined into a single block. It would form a cube of roughly 68 feet on each side, small enough to sit inside a baseball field. Call it Pile A.

Now build Pile B for the same money. With that sum, he said, you could buy all the farmland in America, plus sixteen copies of the most profitable company on the planet, and still have cash left over for walking around money. One pile feeds people and pays dividends for a century. The other just sits there and shines. Which would you pick?

Buffett did not stop at thought experiments. At Berkshire’s 2018 meeting, he ran the numbers. “A farm has utility. An apartment house has utility. A business will produce earnings,” he said. Then he showed what 10,000 dollars put into American stocks in 1942 would have become by 2018. The answer was around 51 million dollars. The same money in gold? About 400,000 dollars. For every rupee the businesses made, gold made less than a paisa.

Back in 2009, he had said the same thing in plainer words. Gold, he told CNBC, “Won’t do anything between now and then except look at you.” Coca-Cola and Wells Fargo, meanwhile, keep making money. He would rather own a goose that lays eggs than one that just sits.

Going Long on Fear: The Behavioural Trap Driving Global Gold Rushes

So, if gold is so weak, why does half the planet keep buying?

Buffett has an answer, and it is uncomfortable. People buy gold because they are afraid, and they bet that others will grow more afraid. “What motivates most gold purchasers is their belief that the ranks of the fearful will grow,” he wrote in 2011. Gold, he once said, is “a way of going long on fear.”

That is why the metal shines brightest in dark times. Wars, currency scares, banking wobbles, all of it sends people running to gold. And as long as more frightened buyers keep arriving, the price keeps climbing. You can see it in any Indian family. The moment headlines turn ugly, someone suggests buying a coin or two, just to feel safe. The trouble, Buffett warns, is that fear is a shaky foundation to build your future on. He likes to quote an old line. “What the wise man does in the beginning, the fool does in the end.”

The $2 Trillion “Useless” Asset: Indian Reality

Now here is where the story turns, because India does not behave like Omaha.

Indians hold an astonishing pile of gold. The World Gold Council estimates households here sit on around 25,000 tonnes of it, the largest private hoard on earth, worth well over two trillion dollars. That is more gold than the central banks of America, Germany and Italy hold put together. The Reserve Bank, by contrast, holds under 900 tonnes. Every wedding adds to the pile. Every Akshaya Tritiya, every Dhanteras, queues form outside jewellers as if nothing else could keep a family safe. Gold here is not a trade. It is a vow passed down through daughters.

Now hold that next to another number. Equity mutual fund assets in India add up to roughly 12 percent of the economy. The global average is closer to 63 percent. So, Indians pour their savings into the asset Buffett calls useless, and mostly skip the productive assets he loves. For a culture that has trusted gold through famines, partitions and broken currencies, that is not madness. It is memory.

Sensex vs. Gold: The Long-Term Compounding Reality

Lately, the memory has paid. Gold jumped more than 70 percent in 2025 and kept climbing into 2026, beating the Sensex handily. The proof is almost funny. The government itself ran a scheme called Sovereign Gold Bonds, paper that tracked the gold price. It quietly stopped issuing new ones, with the last sale in early 2024, because gold rose so fast that paying investors back became too costly. Some early holders walked away with gains of 200 to 300 percent. When even the state gives up on a gold product because gold won too hard, you understand the pull.

But zoom out, and Buffett’s point still stands tall. The Sensex began at a base of 100 [SK1] back in 1979. It now sits near 77,000. That is roughly 770 times your money, before counting a single dividend. Gold over the same stretch went from about Rs 937 for ten grams to over Rs 1.4 lakh, roughly 150 times.

And here’s the truth behind gold’s performance: a large chunk of this return is due to the depreciation of the Indian Rupee vis-a-via the US Dollar. Since gold is priced in US Dollars, every time the Rupee depreciates, the price of gold in India increases even as the international price of gold remains unchanged. I know this is a little complex but suffice it to say that in the Indian context, gold is a great preserver of wealth. The returns that have come in in recent years, are a bonus. 

All That Glitters is Gold – Yes or No?

Here is the honest takeaway, and it is gentler than either side claims.

Buffett is not telling us to throw away our owned bangles. Gold as jewellery, as culture, as a small slice of safety, has its place. What he warns against is treating a metal that does nothing as the engine of your wealth. Insurance and engine are different jobs. Gold can guard you in a storm. It cannot row the boat for thirty years.

The Indian lesson, then, is balance, not surrender. Gold could be the quiet guard in the corner of your portfolio, while productive assets, the businesses and the cash they throw off, do the real compounding. Because a goose that lays eggs will always, over a lifetime, beat a shiny cube that only sits and stares back at you.

Disclaimer:

The purpose of this article is only to share interesting charts, data points, and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only. 

Suhel Khan has been a passionate follower of the markets for over a decade. During this period, he was an integral part of a leading Equity Research organisation based in Mumbai as the Head of Sales & Marketing. Presently, he is spending most of his time dissecting the investments and strategies of the Super Investors of India.