Bought any scrap gold for diversification?

[Wonk]

I'm curious if anyone has considered purchasing scrap gold (jewelry, not teeth) as a means of diversifying their hard assets.  There are pros and cons, of course. 

For pros, scrap gold can be routinely purchased directly from people who are looking to sell for about 80-90% of spot.  Also, in the event of a domestic nationalization, scrap gold flies largely under the radar.  Governments are far more interested in bullion bars and coins rather than scrap gold jewelry.  You would be able to stay within the boundaries of the law while protecting your assets. 

The cons are that it can be a pain to purchase gold this way.  It's also a bit bulky to store. 

Any thoughts?

[Lone Wolf]

Interesting idea.  I had never thought of this.  I am strongly rooting against a domestic nationalization as any government that undertakes such a program has gone off the rails.

Would making friends with a jeweler perhaps be another way to hedge this?  On the (hopefully remote) chance that such an event took place, could someone with a large coin collection ask their friend to hammer them out a ton of rings, a pimptastic gold grill, and a medallion the size of a manhole cover?

[MediumTex]

could someone with a large coin collection ask their friend to hammer them out a ton of rings, a pimptastic gold grill, and a medallion the size of a manhole cover?

At first I thought you meant a backyard grill.  I thought "you know, that would be the ultimate backyard accessory for the pimp who has evereything."

I assume you meant dental accessory, though.

[Lone Wolf]

At first I thought you meant a backyard grill.  I thought "you know, that would be the ultimate backyard accessory for the pimp who has evereything."

LOL, yes, I had intended this grill for my teeth.  But I must say, I like your idea much better!

[smurff]

I'm curious if anyone has considered purchasing scrap gold (jewelry, not teeth) as a means of diversifying their hard assets.  There are pros and cons, of course. 

Collecting scrap gold to be sure to have something safe from confiscation--now that's a great idea. 

I did not do this with gold, but I started doing it with silver a couple of years ago.  Whenever I saw someone selling dinky little forks and spoons and rings I'd buy them up for a couple of bucks each.  My plan was to assemble a lot and sell it directly to a smelter,  but I got caught up in life and had other things to do.  I simply boxed the hoard and kept buying and accumulating.  It now comprises part of my VP.  Here in NYC there are jewelers and smelters in Manhattan's Diamond District (W. 47th Street, between Fifth and Sixth Avenues, and thereabouts) who buy scrap gold, platinum, and silver at honest prices directly from individuals, and there are smelters all over the country that deal with the public as well.  Some of them will even allow you to trade your scrap for precious metal bullion rounds and bars.  With all things, however, be careful.  If a smelter or other buyer rejects a piece you present to them as not real gold or silver, be sure to get it back from them.  Precious metals prices have appreciated so much that crooks will slither through the cracks in your attention span.

BTW, if you do have scrap gold or old jewelry, don't sell it to any of those "cash-for-gold" places or at events held in hotel rooms on weekends by traveling buyers.  Too many of them (though not all) are complete rip-offs, and it can be hard to tell the difference between a legit company and offer if they're dangling  a check in front of you. 

[smurff]

Interesting idea.  I had never thought of this.  I am strongly rooting against a domestic nationalization as any government that undertakes such a program has gone off the rails.

Lone Wolf, coin dealers used to sell small spring-loaded gold-tone frames where you can insert a small gold coin to use it as a pendant or a charm.  They were mostly for small denominations, like a quarter ounce or less. 

Not all coin stores have them.  The idea that one would transform a beautiful coin into jewelry is abhorrent to some coin dealers.  But the antipathy came from the days when people used to WELD a 10 to 14K gold frame to the gold coin to keep it secure--which damaged and reduced the value of the coin.  They may still think of you as a barbarian for asking for the newfangled, non-damaging coin frame, sort of like showing up at a fine wine tasting and asking, "Where's the Thunderbird?"  But it's your coin.

When the Romanovs tried to escape from Russia during the revolution, the women had diamonds and other gems sewn into the hems and seams of their garments.  Doing something like might also work for gold, unless govt. confiscation includes scanning.  Some haute couturiers used to place heavy gold chains in the hems of coats and jackets so that they would hang properly, but now these chains are made of brass and other base metals. I guess if you did something like this with clothing you'd have to tell family about it, otherwise a coat donated to the Salvation Army might make the person who paid $10 for it very, very happy.

On the other hand, keeping gold in open forms that would be too insignificant to have much interest in, at least initially, might work better.  Jewelry and jewelry findings (like wire, clasps, spacers, etc., dental fillings, hammered spoons and bowls and other things like that. 

As for pimp grills, I suspect (sadly) that if gold prices escalate beyond a certain point, those with such visible dental hardware (who have not thought to have it removed) might find themselves hunted and poached by each other.

While HB recommends buying gold bullion for the PP, it might be helpful to buy some numismatic coins that have low premiums on them.  Right now you can still get $10 Liberty, $10 Indian (both almost 1/2 oz.), $20 Liberty, $20 St. Gaudens (both almost 1 oz.) coins from the late 1800s to early 1930s in XF, AU, F, and other non-investment grades for a few dollars more than bullion coins of the same approximate weight.  They are collectors items today and may be exempt from confiscation as most are genuine antiques (older than 100 years old). 

Something I thought of today:  If you have bullion coins that have been graded, certified and sealed in a holder by PCGS or NGC they might be regarded as collector's items even if in lower grade numismatic or higher grade bullion, and therefore be exempt from confiscation.  (Just an idea I had, no guarantee--if the government gets crazy enough they can confiscate anything.  Sorry about the politics.) 

I read in Wikipedia that not ALL gold was confiscated in the 1930s:

http://en.wikipedia.org/wiki/Executive_Order_6102

Individuals were allowed to keep five ounces in coins, so if you had a family of five, that was 25 ounces in coins nonconfiscated.  (Of course, many with lots of gold shipped it abroad for safekeeping.) The government might make a similar exemption.  Also, if you used gold in your profession--a jeweler, dentist, etc.--your gold was largely exempt, but you had to be a real professional.  So if you're thinking about a new profession, contact The Gemological Institute of America, which has great certification and training programs for gemologists and jewelers. 

All of this assumes there would be a confiscation--no evidence that will happen as of now.  Still, it has happened in the past, and it's a good idea to be prepared.

[MediumTex]

I have a gold tooth that I count as .0436% of my PP gold holdings.

[smurff]

Next week I'm going to take some of my sterling silver scrap to a Diamond District smelter to see what I get.  Most of them do a lot of business with gold, but they also handle silver.  If I remember, I'll post the details and results here.