Buffett And India See A Dim Dollar Future

by Robert Lenzner
Forbes.com
11.03.09

A weaker dollar is a big help for commodities and the railroads that carry them, not to mention a certain shiny yellow metal.

You might think that Warren Buffett’s $34 billion bid for the rest of Burlington Northern Santa Fe ( BNI – news – people ) is the most eye-catching investment decision of the day. While the Oracle of Omaha’s bullish bet on America is hardly insignificant, I would like to direct your attention half a world away and ostensibly in a different investment medium: spot gold.

India’s central bank bulked up that nation’s gold reserves by 55% with the purchase of $6.7 billion worth of gold from the International Monetary Fund, which is selling gold reserves to raise funds for lending to poor nations. The move is already profitable, as the Indians bought their gold at prices averaging around $1,000 an ounce. Gold closed at a record $1,085 an ounce Tuesday in New York. The big buy from India follows months of huge gold accumulation by Chinese authorities, as well as hedge fund operators like John Paulson and others amid growing anxiety about the viability of the dollar as the world’s reserve currency.

Instead of turning to gold, Buffett sees Burlington Northern as a growth vehicle to earn more on the billions in cash Berkshire has on its books carrying coal, wheat and other resources across the nation.

India, by comparison, is making a direct bullish call on gold, just as China, its major rival in Southeast Asia, did some months ago. Many experts believe China or Russia may buy the remaining tons of gold IMF wants to liquidate.

The article continues at Forbes.com

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