Gold vs gold mining stocks

Gold near record levels revives an old question. The honest answer starts with an uncomfortable point: gold cannot be valued at all in the way a business can, which changes what you're actually deciding between.

By Nathan Wickham-Hurd · Founder, Oak Growth · First-class Economics & Finance, MBA · Last reviewed August 2026

Context, August 2026. Gold has traded around record levels near $4,000 an ounce through 2026, with silver also sharply higher, driven by inflation running above target, geopolitical conflict and central bank buying. That has revived a question value investors get asked constantly. Market conditions change; the framework below is meant to outlast them.

Why Buffett has never owned gold

The objection is not that gold is a bad asset. It is that gold cannot be valued at all in the way a business can. A company produces cash: you can estimate it, discount it and arrive at a figure for what the whole thing is worth. Gold produces nothing. An ounce bought today is an ounce in thirty years, and the only way it makes you money is if somebody later pays more for it.

That means there is no intrinsic value to compare a price against, and therefore no margin of safety to be had. You are not buying an asset that works for you; you are taking a view on other people's future fear. Buffett's framing is that you can own a pile of metal, or you can own the farms and businesses that produce something every year — and after a century the pile of metal is still just a pile of metal.

The counter-argument deserves stating fairly: gold has held purchasing power across currency regimes for millennia, central banks have been net buyers, and it has no counterparty risk. Those are legitimate reasons to hold some. They are reasons about insurance, not about value.

The three routes, and how they differ

Physical gold and gold ETCs

The closest thing to owning the metal. In Europe a single-commodity product is legally a debt security rather than a fund, because fund rules require diversification — which is why they are called exchange traded commodities, not ETFs. Tracks the gold price closely, minus an annual fee. No leverage, no operational risk, no cash flow.

Gold mining shares

Businesses, and therefore valuable in the normal sense — they have revenue, costs, reserves and cash flow you can discount. They are also leveraged to the gold price in both directions: if all-in sustaining costs are $1,800 an ounce and gold is $2,000, margin is $200; gold rises 20% and margin doubles. The same arithmetic runs in reverse.

Royalty and streaming companies

They finance mines in exchange for a share of future production. Gold price exposure without operating cost inflation or capital expenditure risk, which historically has produced steadier returns on capital than mining itself — at the cost of paying a higher multiple for it.

The uncomfortable truth about miners

Gold mining has been a poor long-run business for shareholders more often than not. The pattern repeats: high gold prices fund expensive acquisitions and marginal projects, costs inflate to absorb the windfall, and shareholders are diluted through equity issuance. A miner is a real business you can analyse — and analysing them honestly is what puts most value investors off.

If you do look, the checks that matter are all-in sustaining cost per ounce against the current price, reserve life and grade, jurisdiction risk, share count over the past decade, and whether return on invested capital has ever exceeded the cost of that capital across a full cycle.

A reasonable position

If you want gold exposure as insurance against currency debasement or crisis, an ETC gives you exactly that with no operational risk, and you should size it as insurance rather than as an investment expected to compound. If you want an investment, buy businesses — and if the business you pick happens to mine gold, value it on its cash flows like any other company, not on a view of the metal.

Value businesses, not commodities

Oak Growth estimates intrinsic value and margin of safety across roughly 1,000 companies in nine markets, and ranks ETFs on returns — so you can see what a business is worth rather than guess at a price.

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Common questions

Is it better to buy gold or gold mining stocks?

They are different exposures. Physical gold or a gold ETC tracks the metal with no operational risk and no cash flow. Mining shares are businesses with revenue and costs, leveraged to the gold price in both directions, and historically prone to diluting shareholders and inflating costs when the metal is expensive.

Why doesn't Warren Buffett invest in gold?

Because it produces nothing, so there is no stream of cash to discount and therefore no way to establish what it is worth. The only return comes from someone paying more for it later. His preference is for productive assets that generate output every year rather than a static store of value.

Can you calculate the intrinsic value of gold?

Not in the discounted cash flow sense. Intrinsic value is derived from the cash an asset produces, and gold produces none, so its price is set purely by supply, demand and sentiment. That means no margin of safety can be calculated the way it can for a company.

What is the difference between a gold ETF and a gold ETC?

In Europe a product tracking a single commodity cannot be structured as a fund, because fund rules require diversification. Physical gold products are therefore issued as secured debt securities backed by allocated metal, which is why they are labelled exchange traded commodities rather than exchange traded funds.

Also see: What is an ETC? → · Warren Buffett's investment strategy → · What is the safest investment? →