physical gold?

[jk]

a question in my mind is whether to own physical gold, and secondarily whether to own physical gold located outside of this country.

all my precious metal investments currently are in brokerage accounts in the form of gld, slv, tgldx, paas, nem. i have read many recommendations to hold physical gold, but haven't done so because it seems like a bother and i don't picture society breaking down to the point that i need possession of precious metals. maybe i'm being overly optimistic, though that particular flaw has rarely been a problem for me.

the other, related, question is whether to own metal outside the u.s., e.g. at the perth mint or in a safe deposit box in a non-u.s. bank. again, i haven't done, though i've toyed with the idea.

any thoughts?

[blazespinnaker]

Physical gold, as a hedge against a breakdown in the fiat system, makes perfect sense to me. It's insurance that will pay out in the *very low* probabilty situation that real currency isn't useful anymore.

For example: I hold insurance for a lot of very low probability events in my life: earthquake insurance, life insurance, etc.

If I die, I am pretty sure my wife will get paid out. Similarly, I went to great trouble to make sure my insurer could handle paying out earthquake in case something happened to my local area.

But brokerage gold? If the fiat system breaks down, exactly how are people going to get paid out?

It seems to me that most people who invest in gold are hoping things go badly, but not so badly that they can't get access to their investments. That seems like an odd financial tightrope to be walking.

[jk]

the value of a gold position

But brokerage gold? If the fiat system breaks down, exactly how are people going to get paid out?

It seems to me that most people who invest in gold are hoping things go badly, but not so badly that they can't get access to their investments. That seems like an odd financial tightrope to be walking.

not necessarily hoping, just worrying about it. did you buy earthquake insurance because you were hoping for an earthquake? no, you view it as a low probability but devastating possibility, so it's worth something for you to insure against it. yes, gold would do well if the economy suffers in certain ways. but there's badly and there's BADLY!

upon reflection, it seems to me that there are two different scenarios in which gold is relevant. in one, a fairly high probability outcome in my opinion, the value of the dollar declines substantially.

in another thread i noted that it's been 35 years since the dollar was fully untethered from gold. in that time a dollar has lost 79% of its value. i asked where it might be in another 35 years. i think it's likely it will lose even more value more quickly. but will the dollar be gone? will we, or our survivors, be trading shells, gold and silver coins, "new" dollars? anyway, i think a substantial loss of value for the dollar is a relatively high probability over the next decade.

on the other hand, there is some possibility of a total breakdown in the currency. so if grocery stores won't accept dollars, what will they accept? if the grocery store isn't taking dollars, how did the store obtain its supplies from a wholesaler? i it seems to me this scenario has a low [albeit non-zero] probability. but it represents such an extreme social breakdown that you might be better off stockpiling food and weapons.

[blazespinnaker]

(albeit non-zero) probability. but it represents such an extreme social breakdown that you might be better off stockpiling food and weapons.

For sure. But some type of currency will be handy to have, I suspect. Anyways, with all the talk about bird flu and what not, I would say the likelihood of an earthquake in my area is only a few times greater than the breakdown in fiat currency.

Is it going to happen? I really really doubt it. But, hey, always good to be prepared

[Jim Nickerson]

on the other hand, there is some possibility of a total breakdown in the currency. so if grocery stores won't accept dollars, what will they accept? if the grocery store isn't taking dollars, how did the store obtain its supplies from a wholesaler? i it seems to me this scenario has a low [albeit non-zero] probability. but it represents such an extreme social breakdown that you might be better off stockpiling food and weapons.

These thoughts are similar to mine. If I have a piece of gold in my pocket that is worth whatever number of thousands of dollars one wishes to believe it could be, I cannot go to store and spend it. I must go somewhere and liquidate it, and I have no assurance in a real crisis that I can do that.

I read almost no books, but read one recently. "The Second Great Depression--Starting 2007 Ending 2020" by Warren Brussee, a retired engineer. I heard Mr. Brussee interviewed by Jim Puplava at financialsense.com some months ago, and besides the topic of depression itself, the thing that appealed to me was Brussee did not come across as some stark raving maniac intent on selling his book. It could be Brussee is crazy. Some of Brussee's thoughts didn't make sense to me, but that is likely more me than his thoughts. The thing I found most interesting was Chapter 4 in which Brussee describes how life may become were such a severe depression to occur, and it is a bleak picture, worse than anything I am capable of imagining as a consequence of a financial collapse. I presume his thoughts came about from research of how life was in the '30's.

Thinking about a situation as he apparently believes will occur which is really dire by any standard, it struck me that even if I had physical gold which happened to be worth a lot, I am not sure I would want to be seen going into or coming out of a gold market to liquidate real gold even if I get licensed to carry my pistols as one can do here in Texas. Reading this myself, I think I may be being silly or absolutely irrational, but what I am imagining is hopefully a true worst case scenario--actually Brussee imagined it.

So far I am not convinced to go buy real gold, and perhaps I will rue my contrariness.