Doubt about the Gold Funds/ETFs, phobia or rational?

[Mike59]

I'm finding myself increasingly paranoid about currency devaluation and am starting to wonder if the paper gold would stay true to its purpose in a currency collapse.

I have my gold portion in 2 funds 50/50 (Central Gold Trust and Ishares Gold Bullion Trust) and about 5% of the gold allocation in gold (mostly silver ) coins easily accessible.  I know logically that there are audits on these ETFs/funds by independent accounting firms, but still have my doubts. I'm aware of my options to subdivide into pool accounts or more physical/safety deposit box etc. 

My primary purpose in posting is to feel out if others here are as paranoid as I am?  What balance of ETFs/physical are you holding percentage wise within your gold allocation?

[Mark Leavy]

I'm finding myself increasingly paranoid about currency devaluation and am starting to wonder if the paper gold would stay true to its purpose in a currency collapse.

I have my gold portion in 2 funds 50/50 (Central Gold Trust and Ishares Gold Bullion Trust) and about 5% of the gold allocation in gold (mostly silver ) coins easily accessible.  I know logically that there are audits on these ETFs/funds by independent accounting firms, but still have my doubts. I'm aware of my options to subdivide into pool accounts or more physical/safety deposit box etc. 

My primary purpose in posting is to feel out if others here are as paranoid as I am?  What balance of ETFs/physical are you holding percentage wise within your gold allocation?

Mike, you are asking yourself some great questions.

I think that part of the reason you are teetering is that you haven't yet gone through the process of buying physical gold - so it is an unknown adventure for you.

Bite the bullet and buy one or two coins and put them in a storage locker or a safe deposit box or a wine vault.  It will cost you little to run this experiment.

After you find out that it is an easy, normal transaction - it will be easier for you to figure out if there is any reason to maintain paper gold.

I'm a big fan of paranoia - but that doesn't even figure into it for me.  I just can't see any upside to holding paper gold compared to physical.

EDIT - I just noticed that you said you own some physical.  My mistake.  Ignore everything I said

[ochotona]

In my city, I worry about home invasions. Even with a safe, they'll put a gun to your wife's head and order her to open the safe.

[Mike59]

Thanks for the reply Mark, your comments are helpful and have got me thinking about the pros of each (with my variation of the paranoid personality I can go to extremes you know!) , just thinking/typing out loud:

For paper/ETF:
- easier/immediate point-and-click purchases, lightning quick rebalancing and conversion to fiat / cash/ stocks/bonds
- lower annual fees
- able to buy at a discount (GTU), ultimately higher stack
- deferred capital gains in tax-free savings/retirement accounts and subsequent compounding


For physical:
- guaranteed access in crisis (depending on where it's kept)
- no counterparty/middle-men
(these may be the only factors needed to outweigh all of the paper pros?)
a tangible bonus:
- Sensory: shiny visuals, clink noises (especially silver), and readily available for fondling/stroking (which I haven't done with my current stack in probably 2+ years, desire to fondle appears to correlated with price) 

[Mike59]

In my city, I worry about home invasions. Even with a safe, they'll put a gun to your wife's head and order her to open the safe.

What are you supposed to tell them if they think you have a safe and you really don't!? 

[Pointedstick]

In my city, I worry about home invasions. Even with a safe, they'll put a gun to your wife's head and order her to open the safe.

Sounds like a good reason to either:

- Store your gold off-site
- Move to a different city
- Build a series of elaborate deathtraps around your house's entryways to turn anyone trying to forcibly enter into tapioca pudding

[sophie]

I'm finding myself increasingly paranoid about currency devaluation and am starting to wonder if the paper gold would stay true to its purpose in a currency collapse.

I've thought about the same thing!  I've started to convert all my ETF gold to physical, leaving only about 20% or so in tax-deferred accounts to make rebalancing easier.

My coins are all in a bank safe deposit box, and that's what most do I believe.  If you're going to keep some at home, I suggest the "hiding in plain sight" approach.  There are lots of suggestions on the internet for secret stash locations.  Burglars can read too, but surely you can use your imagination to come up with your own ideas.

If that fails, you can always try PS's tapioca approach...

[Mark Leavy]

In my city, I worry about home invasions. Even with a safe, they'll put a gun to your wife's head and order her to open the safe.

ochotana, do you live in Buenos Aires?  No matter.

You are right.  No security measures will survive a gun to the head of a loved one.

Forget anything you read here.  Move somewhere that reduces the probability of a gun to the head of your wife.  Nothing else that you do makes sense.  You know what you see.  Some places are better than others and no place is guaranteed.  But you wouldn't say what you did if you weren't worried.  Move, damn it.  Seriously.

Mark

[madbean]

In my city, I worry about home invasions. Even with a safe, they'll put a gun to your wife's head and order her to open the safe.

Are you saying that only your wife would open the safe with a gun to her head? What would you do?

[ochotona]

I live in a large city in Texas. Yes, I am working diligently on retiring and moving. My wife is not a gun user. I would be sending .40 S&W rounds their way.

In my city, I worry about home invasions. Even with a safe, they'll put a gun to your wife's head and order her to open the safe.

Are you saying that only your wife would open the safe with a gun to her head? What would you do?

[MachineGhost]

Guys, the purpose of gold is to protect you against a collapse in systemic confidence, including government.

Own it as real.  Anything else is stupidity.  Especially if you're out of the USA.

[ochotona]

However, I did ask on a prepper forum if they thought gold was a useful medium of exchange in an emergency, and everyone thought not.

Guys, the purpose of gold is to protect you against a collapse in systemic confidence, including government.

Own it as real.  Anything else is stupidity.  Especially if you're out of the USA.

[MachineGhost]

However, I did ask on a prepper forum if they thought gold was a useful medium of exchange in an emergency, and everyone

That's like asking a fox guarding a henhouse if he's hungry.  Preppers have a Neo-Luddite viewpoint.  They're ideological extremists in the same way ISIS fighters are.  Do you really think we're gonna roll back all the great inventions and breakthroughs of the last hundreds of years so we can again all squat shit in the vast darkness and without ultra soft toilet paper?

If you're worried about a global SHTF scenario (i.e. extraterrestrial invasion or ISIS), then stock up on cigarettes, alcohol, Ivory Soap, cheap jewelry and condoms.  I'm fine with gold coins and junk silver.  I have faith in human civilization's relentlessly optimistic drive and desire to innovate, improve, invorigate, imitate and intubate.

[Libertarian666]

However, I did ask on a prepper forum if they thought gold was a useful medium of exchange in an emergency, and everyone thought not.

Guys, the purpose of gold is to protect you against a collapse in systemic confidence, including government.

Own it as real.  Anything else is stupidity.  Especially if you're out of the USA.

The purpose of gold in an extreme scenario is to preserve purchasing power until AFTER the reset. During the crisis, you want to have as little interaction with the outside world as possible, so no type of money is very useful.

[ochotona]

Toilet paper

then stock up on cigarettes, alcohol, Ivory Soap, cheap jewelry and condoms

[barrett]

Gradually working towards a higher percentage in the physical metal. No, I don't trust the gold ETFs very much but I'll keep some in there in tax-deferred accounts for ease of rebalance without incurring taxable gains. Just trying to roughly balance all the risks with convenience.

[Ad Orientem]

IMHO most of the gold ETFs are sound enough for the routine ups and downs in the market. Even a serious spike in inflation I think would not bring them down. Their big weakness is in the event of the proverbial SHTF scenario. If the financial markets are closed for any length of time, or the government takes measures that might be partly or completely confiscatory (extremely unlikely but not impossible) then you could be seriously screwed.

Remember that gold is not just a hedge on inflation. It is your disaster insurance. You want to have at least some of that in physical form and under your direct control to the extent practical. Conceding that all storage plans have potential risks, I personally prefer a bank safe deposit box over any form of home storage, which I consider inherently high risk.

[Mike59]

Thanks for the replies.

As contrary as it is to purist-PP thinking, I like that I started with physical silver, at least it is in smaller denominations and less to worry about. As I added to the PP I've become Gold Fund heavy and silver is now <5% of my gold holdings. I'm thinking I'll move some of my gold ETF holdings into physical gold and store in a safety deposit box.

What are people's thoughts about allocated gold in another country. I get the sense these companies could be like a bitcoin exchange and you're screwed if they close up shop suddenly. In a SHTF scenario doesn't transporting the gold across a border cause some issues and serious tax consequences (declaring a capital gain from another country, limits on how much can cross the border on your person etc.) , unless you figure you'd just setup in the Bahamas or Caymans and start a new life?!

[Ad Orientem]

Thanks for the replies.

As contrary as it is to purist-PP thinking, I like that I started with physical silver, at least it is in smaller denominations and less to worry about. As I added to the PP I've become Gold Fund heavy and silver is now <5% of my gold holdings. I'm thinking I'll move some of my gold ETF holdings into physical gold and store in a safety deposit box.

What are people's thoughts about allocated gold in another country. I get the sense these companies could be like a bitcoin exchange and you're screwed if they close up shop suddenly. In a SHTF scenario doesn't transporting the gold across a border cause some issues and serious tax consequences (declaring a capital gain from another country, limits on how much can cross the border on your person etc.) , unless you figure you'd just setup in the Bahamas or Caymans and start a new life?!

Overseas storage of gold has advantages (and some drawbacks) that are covered extensively in chapter 15 of Craig and MT's book. But the executive summary is to stick to countries with a strong history of stable government, respect for property rights and the rule of law, and that are not likely to fold up like a cheap lawn chair the first time the US Government stares at them. As for institutions, a number are covered in the book. But again briefly, stick with well established ones that are highly reputable.