Is Physical Gold Really "Necessary" to US Citizens?

[TripleB]

The idea of having physical gold in the PP is nice, and assuring. I question how important it is. The reason for this post, is to explore the costs/benefits of holding physical gold. It's certainly ideal to hold physical gold, just as it's ideal to get married and have a loving wife. The reality though is that there are risks involved and things don't always turn out as planned.

I reject the notion of using gold coins to barter in the post-apocalyptic world. Most Americans today are "pussies" and will have their valuables taken by force, by the 1% of society that are Sociopaths. Some Americans are strong/fighters who are not sociopaths, but we probably won't protect the pussies because we're too busy protecting ourselves and our families.

If society collapsed, I don't see people bartering gold coins. It seems kind of ridiculous. I see people bartering services and tangible items like food, water containers, fuel, ammo, etc.

I don't see the US Government collapsing, along with the US Dollar, without society going into collapse as well. So the idea that the gold coins will protect me from a government collapse, just sends me into the scenario of above where I don't feel the need to barter coins in the future.

That said, there are a few things physical gold is good for, in my mind:

1) Failure of ETFs that hold gold.
2) Tyrannical Government that seizes/freezes assets of dissenters
3) Getting out of the country, before a society collapse, and using the coins as bribes or to demonstrate wealth to a new country

I'll address these one at a time:

1) Failure of ETFs that hold gold. This has to be weighed against the risk of theft/less of physical gold coins. What are the chances that the ETF will fail, versus you losing your coins?

The existing risk, looking backwards are that *no* Gold ETFs have ever failed. However, people have had their gold coins stolen from their homes, and seized from "abandoned" safe deposit boxes. I'd like to think that I can control the risk better by holding the coins myself, but that may be the same irrational thought process that makes people think it's safer to drive a car than to fly in an airplane. It's the "illusion" of control.

2) Tyrannical Government that seizes/freezes assets of dissenters.

This is a legitimate risk, and one that merits having some portion of gold coins separate from your "traceable" accounts. In this case, I wouldn't store them anywhere that is tied to you, nor would I insure them. This drives the risk of loss up, but is the only way to ensure a future tyrannical government doesn't freeze all your wealth.

3) Getting out of the country, before a society collapse, and using the coins as bribes or to demonstrate wealth to a new country

This is legitimate but I think it's probable you will still have access to your brokerage accounts, even if the country fails. It would also be safer to electronically forward money to your new country, then try to transport gold coins. The theory being that current first world nations typically require $X in wealth for someone to emmigrate in. i.e. If you want to become a citizen of Switzerland you have to have something like $1M in net worth, because they don't want you to be a drain on their society, using their welfare systems. I envision something similar in the future if the US collapsed, where other countries would allow US Citizens in, if we had a certain level of wealth.

Ideally holding physical gold is great. But in reality, it can be stolen from your home, or seized from your safe deposit box. You can insure it for 0.5% to 5% or so, depending on storage conditions, but there's counterparty risk involved because the insurance company may default or refuse to pay. In my mind, having 1% to 5% of your overall portfolio in physical gold coins, should be "good" and if I had to estimate, may be a risk-reward efficient position.

For example, having another marginal unit of physical gold puts greater risk on theft, but the benefit of that marginal unit of gold in the event of country collapse is minimal.

[craigr]

Physical gold was used after Argentina's currency problems in 2001. Barter markets soon stopped working as it became way too complex to trade X for Y for Z for Q for P to finally get the A you really wanted. Gold solves the transaction problems because everyone took it.

Having some gold and cash around that you can get to quickly in an emergency is never a bad idea.

[clacy]

I don't currently hold any physical gold, but will add a physical portion at some point.  It's probably similar to a firearm for protection.  It's much better to have one and not need it, than it is to need one and not have it.

[MediumTex]

I would say if the Fed deems it necessary to hold physical gold, I want to hold some too.

On a serious note, my Mother has some silver coins that she collected in the 1960s as they began to disappear from circulation.  She has held them all these years.  There have been no expense ratios, storage fees, insurance, commissions or taxes on her box of coins.  There is something to be said for having an asset as worry free and simple as this. 

[Pres]

Physical is best, just ask Celente, he bought futures and just lost a lot of money...

http://www.youtube.com/watch?v=W02n-wjPqNE

[Ad Orientem]

There is no method of holding gold that is risk free.  Counterparty risk affects every option except home storage, which has its own risks that IMO outweigh the counterpaty risks of a bank safe deposit box or even an ETF.  I really don't have a problem with having some of your gold in an ETF for convenience purposes as long as you understand and are willing to accept the risks that come with it.  But I will always advocate keeping enough gold in physical form, somewhere you can get you hands on it quickly, to keep a roof over your head and food on your table for a couple years in case a catastrophic situation does come to pass.  Do I expect such a thing?  No.  But I am a student of history and no one expected it in June of 1914 either.

[Coffee]

to keep a roof over your head and food on your table for a couple years in case a catastrophic situation does come to pass. 

How many of us could afford to keep $100k in gold coins buried in our backyard?

[Ad Orientem]

to keep a roof over your head and food on your table for a couple years in case a catastrophic situation does come to pass. 

How many of us could afford to keep $100k in gold coins buried in our backyard?

If you need $100k to maintain a roof over your head and keep food on the table for two years you may be shopping in the wrong place.  I am not talking about high end living or even middle class existence.  I am talking about surviving a major financial / economic crisis.  A small apartment and shopping at a discount grocery should not run that high.  And my guess is that in such an environment gold may have a lot more purchasing power than what it does now.

That said you do the best you can with what you have.

[vnatale]

The idea of having physical gold in the PP is nice, and assuring. I question how important it is. The reason for this post, is to explore the costs/benefits of holding physical gold. It's certainly ideal to hold physical gold, just as it's ideal to get married and have a loving wife. The reality though is that there are risks involved and things don't always turn out as planned.

I reject the notion of using gold coins to barter in the post-apocalyptic world. Most Americans today are "pussies" and will have their valuables taken by force, by the 1% of society that are Sociopaths. Some Americans are strong/fighters who are not sociopaths, but we probably won't protect the pussies because we're too busy protecting ourselves and our families.

If society collapsed, I don't see people bartering gold coins. It seems kind of ridiculous. I see people bartering services and tangible items like food, water containers, fuel, ammo, etc.

I don't see the US Government collapsing, along with the US Dollar, without society going into collapse as well. So the idea that the gold coins will protect me from a government collapse, just sends me into the scenario of above where I don't feel the need to barter coins in the future.

That said, there are a few things physical gold is good for, in my mind:

1) Failure of ETFs that hold gold.
2) Tyrannical Government that seizes/freezes assets of dissenters
3) Getting out of the country, before a society collapse, and using the coins as bribes or to demonstrate wealth to a new country

I'll address these one at a time:

1) Failure of ETFs that hold gold. This has to be weighed against the risk of theft/less of physical gold coins. What are the chances that the ETF will fail, versus you losing your coins?

The existing risk, looking backwards are that *no* Gold ETFs have ever failed. However, people have had their gold coins stolen from their homes, and seized from "abandoned" safe deposit boxes. I'd like to think that I can control the risk better by holding the coins myself, but that may be the same irrational thought process that makes people think it's safer to drive a car than to fly in an airplane. It's the "illusion" of control.

2) Tyrannical Government that seizes/freezes assets of dissenters.

This is a legitimate risk, and one that merits having some portion of gold coins separate from your "traceable" accounts. In this case, I wouldn't store them anywhere that is tied to you, nor would I insure them. This drives the risk of loss up, but is the only way to ensure a future tyrannical government doesn't freeze all your wealth.

3) Getting out of the country, before a society collapse, and using the coins as bribes or to demonstrate wealth to a new country

This is legitimate but I think it's probable you will still have access to your brokerage accounts, even if the country fails. It would also be safer to electronically forward money to your new country, then try to transport gold coins. The theory being that current first world nations typically require $X in wealth for someone to emmigrate in. i.e. If you want to become a citizen of Switzerland you have to have something like $1M in net worth, because they don't want you to be a drain on their society, using their welfare systems. I envision something similar in the future if the US collapsed, where other countries would allow US Citizens in, if we had a certain level of wealth.

Ideally holding physical gold is great. But in reality, it can be stolen from your home, or seized from your safe deposit box. You can insure it for 0.5% to 5% or so, depending on storage conditions, but there's counterparty risk involved because the insurance company may default or refuse to pay. In my mind, having 1% to 5% of your overall portfolio in physical gold coins, should be "good" and if I had to estimate, may be a risk-reward efficient position.

For example, having another marginal unit of physical gold puts greater risk on theft, but the benefit of that marginal unit of gold in the event of country collapse is minimal.

The above reads as though it could have been written by Kbg.

Kbg -- Do you disagree with a word of it??!!!

Vinny

[ppnewbie]

Great book recommendation for all of my fellow collapsatarians. “The Mandibles” by Lionel Shriver. It’s a fun read that tells the story of a family living through in the US as it defaults on its debts, loses world reserve currency status and seizes the assets of its citizens.

It’s a fun read

[Kriegsspiel]

Great book recommendation for all of my fellow collapsatarians. “The Mandibles” by Lionel Shriver. It’s a fun read that tells the story of a family living through in the US as it defaults on its debts, loses world reserve currency status and seizes the assets of its citizens.

It’s a fun read

Mandibles was very good. It's the "you need gold coins to survive the apocalypse" of family-decline books. Buddenbrooks, I believe, is the "gold is a good diversifier for mundane and likely scenarios," being more sober and low-key depressing. They're both good in their own rights and have relevant lessons for today.

[vnatale]

The idea of having physical gold in the PP is nice, and assuring. I question how important it is. The reason for this post, is to explore the costs/benefits of holding physical gold. It's certainly ideal to hold physical gold, just as it's ideal to get married and have a loving wife. The reality though is that there are risks involved and things don't always turn out as planned.

I reject the notion of using gold coins to barter in the post-apocalyptic world. Most Americans today are "pussies" and will have their valuables taken by force, by the 1% of society that are Sociopaths. Some Americans are strong/fighters who are not sociopaths, but we probably won't protect the pussies because we're too busy protecting ourselves and our families.

If society collapsed, I don't see people bartering gold coins. It seems kind of ridiculous. I see people bartering services and tangible items like food, water containers, fuel, ammo, etc.

I don't see the US Government collapsing, along with the US Dollar, without society going into collapse as well. So the idea that the gold coins will protect me from a government collapse, just sends me into the scenario of above where I don't feel the need to barter coins in the future.

That said, there are a few things physical gold is good for, in my mind:

1) Failure of ETFs that hold gold.
2) Tyrannical Government that seizes/freezes assets of dissenters
3) Getting out of the country, before a society collapse, and using the coins as bribes or to demonstrate wealth to a new country

I'll address these one at a time:

1) Failure of ETFs that hold gold. This has to be weighed against the risk of theft/less of physical gold coins. What are the chances that the ETF will fail, versus you losing your coins?

The existing risk, looking backwards are that *no* Gold ETFs have ever failed. However, people have had their gold coins stolen from their homes, and seized from "abandoned" safe deposit boxes. I'd like to think that I can control the risk better by holding the coins myself, but that may be the same irrational thought process that makes people think it's safer to drive a car than to fly in an airplane. It's the "illusion" of control.

2) Tyrannical Government that seizes/freezes assets of dissenters.

This is a legitimate risk, and one that merits having some portion of gold coins separate from your "traceable" accounts. In this case, I wouldn't store them anywhere that is tied to you, nor would I insure them. This drives the risk of loss up, but is the only way to ensure a future tyrannical government doesn't freeze all your wealth.

3) Getting out of the country, before a society collapse, and using the coins as bribes or to demonstrate wealth to a new country

This is legitimate but I think it's probable you will still have access to your brokerage accounts, even if the country fails. It would also be safer to electronically forward money to your new country, then try to transport gold coins. The theory being that current first world nations typically require $X in wealth for someone to emmigrate in. i.e. If you want to become a citizen of Switzerland you have to have something like $1M in net worth, because they don't want you to be a drain on their society, using their welfare systems. I envision something similar in the future if the US collapsed, where other countries would allow US Citizens in, if we had a certain level of wealth.

Ideally holding physical gold is great. But in reality, it can be stolen from your home, or seized from your safe deposit box. You can insure it for 0.5% to 5% or so, depending on storage conditions, but there's counterparty risk involved because the insurance company may default or refuse to pay. In my mind, having 1% to 5% of your overall portfolio in physical gold coins, should be "good" and if I had to estimate, may be a risk-reward efficient position.

For example, having another marginal unit of physical gold puts greater risk on theft, but the benefit of that marginal unit of gold in the event of country collapse is minimal.

He does make compelling arguments here. Has anything happened nine years later to negate any of arguments?

Vinny

[vnatale]

There is no method of holding gold that is risk free.  Counterparty risk affects every option except home storage, which has its own risks that IMO outweigh the counterpaty risks of a bank safe deposit box or even an ETF.  I really don't have a problem with having some of your gold in an ETF for convenience purposes as long as you understand and are willing to accept the risks that come with it.  But I will always advocate keeping enough gold in physical form, somewhere you can get you hands on it quickly, to keep a roof over your head and food on your table for a couple years in case a catastrophic situation does come to pass.  Do I expect such a thing?  No.  But I am a student of history and no one expected it in June of 1914 either.

I thought your "June of 1914" reference was referring to the start of World War I. But that seemed to have started on July 28, 1914.

I went here: https://en.wikipedia.org/wiki/June_1914 to see if there had been any June 1914 event related to gold but could not find any reference to gold.

Therefore, what DID happen in June 1914??!!

Vinny

[Harry.Browne]

Assassination June 28, 1914
https://en.wikipedia.org/wiki/Assassina ... _Ferdinand

[vnatale]

Assassination June 28, 1914
https://en.wikipedia.org/wiki/Assassina ... _Ferdinand

It then took a FULL month for the war to start? I know I read all about this in Guns of August but that was about 15 years old when I read that book.

Vinny

[vnatale]

The idea of having physical gold in the PP is nice, and assuring. I question how important it is. The reason for this post, is to explore the costs/benefits of holding physical gold. It's certainly ideal to hold physical gold, just as it's ideal to get married and have a loving wife. The reality though is that there are risks involved and things don't always turn out as planned.

I reject the notion of using gold coins to barter in the post-apocalyptic world. Most Americans today are "pussies" and will have their valuables taken by force, by the 1% of society that are Sociopaths. Some Americans are strong/fighters who are not sociopaths, but we probably won't protect the pussies because we're too busy protecting ourselves and our families.

If society collapsed, I don't see people bartering gold coins. It seems kind of ridiculous. I see people bartering services and tangible items like food, water containers, fuel, ammo, etc.

I don't see the US Government collapsing, along with the US Dollar, without society going into collapse as well. So the idea that the gold coins will protect me from a government collapse, just sends me into the scenario of above where I don't feel the need to barter coins in the future.

That said, there are a few things physical gold is good for, in my mind:

1) Failure of ETFs that hold gold.
2) Tyrannical Government that seizes/freezes assets of dissenters
3) Getting out of the country, before a society collapse, and using the coins as bribes or to demonstrate wealth to a new country

I'll address these one at a time:

1) Failure of ETFs that hold gold. This has to be weighed against the risk of theft/less of physical gold coins. What are the chances that the ETF will fail, versus you losing your coins?

The existing risk, looking backwards are that *no* Gold ETFs have ever failed. However, people have had their gold coins stolen from their homes, and seized from "abandoned" safe deposit boxes. I'd like to think that I can control the risk better by holding the coins myself, but that may be the same irrational thought process that makes people think it's safer to drive a car than to fly in an airplane. It's the "illusion" of control.

2) Tyrannical Government that seizes/freezes assets of dissenters.

This is a legitimate risk, and one that merits having some portion of gold coins separate from your "traceable" accounts. In this case, I wouldn't store them anywhere that is tied to you, nor would I insure them. This drives the risk of loss up, but is the only way to ensure a future tyrannical government doesn't freeze all your wealth.

3) Getting out of the country, before a society collapse, and using the coins as bribes or to demonstrate wealth to a new country

This is legitimate but I think it's probable you will still have access to your brokerage accounts, even if the country fails. It would also be safer to electronically forward money to your new country, then try to transport gold coins. The theory being that current first world nations typically require $X in wealth for someone to emmigrate in. i.e. If you want to become a citizen of Switzerland you have to have something like $1M in net worth, because they don't want you to be a drain on their society, using their welfare systems. I envision something similar in the future if the US collapsed, where other countries would allow US Citizens in, if we had a certain level of wealth.

Ideally holding physical gold is great. But in reality, it can be stolen from your home, or seized from your safe deposit box. You can insure it for 0.5% to 5% or so, depending on storage conditions, but there's counterparty risk involved because the insurance company may default or refuse to pay. In my mind, having 1% to 5% of your overall portfolio in physical gold coins, should be "good" and if I had to estimate, may be a risk-reward efficient position.

For example, having another marginal unit of physical gold puts greater risk on theft, but the benefit of that marginal unit of gold in the event of country collapse is minimal.

Nearly nine years later have any Gold ETFs failed?

Vinny

[vnatale]

The idea of having physical gold in the PP is nice, and assuring. I question how important it is. The reason for this post, is to explore the costs/benefits of holding physical gold. It's certainly ideal to hold physical gold, just as it's ideal to get married and have a loving wife. The reality though is that there are risks involved and things don't always turn out as planned.

I reject the notion of using gold coins to barter in the post-apocalyptic world. Most Americans today are "pussies" and will have their valuables taken by force, by the 1% of society that are Sociopaths. Some Americans are strong/fighters who are not sociopaths, but we probably won't protect the pussies because we're too busy protecting ourselves and our families.

If society collapsed, I don't see people bartering gold coins. It seems kind of ridiculous. I see people bartering services and tangible items like food, water containers, fuel, ammo, etc.

I don't see the US Government collapsing, along with the US Dollar, without society going into collapse as well. So the idea that the gold coins will protect me from a government collapse, just sends me into the scenario of above where I don't feel the need to barter coins in the future.

That said, there are a few things physical gold is good for, in my mind:

1) Failure of ETFs that hold gold.
2) Tyrannical Government that seizes/freezes assets of dissenters
3) Getting out of the country, before a society collapse, and using the coins as bribes or to demonstrate wealth to a new country

I'll address these one at a time:

1) Failure of ETFs that hold gold. This has to be weighed against the risk of theft/less of physical gold coins. What are the chances that the ETF will fail, versus you losing your coins?

The existing risk, looking backwards are that *no* Gold ETFs have ever failed. However, people have had their gold coins stolen from their homes, and seized from "abandoned" safe deposit boxes. I'd like to think that I can control the risk better by holding the coins myself, but that may be the same irrational thought process that makes people think it's safer to drive a car than to fly in an airplane. It's the "illusion" of control.

2) Tyrannical Government that seizes/freezes assets of dissenters.

This is a legitimate risk, and one that merits having some portion of gold coins separate from your "traceable" accounts. In this case, I wouldn't store them anywhere that is tied to you, nor would I insure them. This drives the risk of loss up, but is the only way to ensure a future tyrannical government doesn't freeze all your wealth.

3) Getting out of the country, before a society collapse, and using the coins as bribes or to demonstrate wealth to a new country

This is legitimate but I think it's probable you will still have access to your brokerage accounts, even if the country fails. It would also be safer to electronically forward money to your new country, then try to transport gold coins. The theory being that current first world nations typically require $X in wealth for someone to emmigrate in. i.e. If you want to become a citizen of Switzerland you have to have something like $1M in net worth, because they don't want you to be a drain on their society, using their welfare systems. I envision something similar in the future if the US collapsed, where other countries would allow US Citizens in, if we had a certain level of wealth.

Ideally holding physical gold is great. But in reality, it can be stolen from your home, or seized from your safe deposit box. You can insure it for 0.5% to 5% or so, depending on storage conditions, but there's counterparty risk involved because the insurance company may default or refuse to pay. In my mind, having 1% to 5% of your overall portfolio in physical gold coins, should be "good" and if I had to estimate, may be a risk-reward efficient position.

For example, having another marginal unit of physical gold puts greater risk on theft, but the benefit of that marginal unit of gold in the event of country collapse is minimal.

Another ten years having gone by only seems to reinforce his argument above?

[bitcoininthevp]

1) Failure of ETFs that hold gold. This has to be weighed against the risk of theft/less of physical gold coins. What are the chances that the ETF will fail, versus you losing your coins?

Maybe you were mentally including these risks under the "Failure of ETFs that hold gold" umbrella, but to outline some example risks of the ETF:

- "Paper" gold price might not track physical price
- Confiscation methods are trivial for ETFs, harder for physical
- Wealth or other taxes (similar to confiscation)
- Freezing of assets
- Potential restrictions on amounts you can sell or otherwise transact

The likelihood of all of these seems way up over the last couple years and to my eye trending upward into the future. And yes, I realize some of these might require resisting or disobeying laws on the physical side of things.

[SomeDude]

1) Failure of ETFs that hold gold. This has to be weighed against the risk of theft/less of physical gold coins. What are the chances that the ETF will fail, versus you losing your coins?

Maybe you were mentally including these risks under the "Failure of ETFs that hold gold" umbrella, but to outline some example risks of the ETF:

- "Paper" gold price might not track physical price
- Confiscation methods are trivial for ETFs, harder for physical
- Wealth or other taxes (similar to confiscation)
- Freezing of assets
- Potential restrictions on amounts you can sell or otherwise transact

The likelihood of all of these seems way up over the last couple years and to my eye trending upward into the future. And yes, I realize some of these might require resisting or disobeying laws on the physical side of things.

These are all great points. I'd add that it's almost always to a person's advantage to look less wealthy on paper. Governments, creditors, lawyers, wives you're divorcing......it's good to have a stash they don't know about.

Having a 750k net worth might let you fly under a radar that $1M might not.

And there is no chance an etf tracking gold will come close to the real physical price in a true emergency or currency crisis. Not even close.