5 ms·

Makes sense. However, couldn't this be a sign that people are getting ready for if/when the current financial system fails?

arethuza 6y ago
If the current financial system fails how does it help to have bits of paper saying that you "own" gold in a warehouse somewhere?
- jasode 6y ago
  I didn't downvote your comment but a lot of regular people do buy physical gold (coins & bars)[1] and store the precious metals in a safe. That said, I don't know how much the gold price is affected by gold ETF vs physical transactions. [1] example of gold coins that are very popular with easy liquidity: https://catalog.usmint.gov/coins/precious-metal-coins/gold/ https://catalog.usmint.gov/coins/precious-metal-coins/gold/ [2] example of liquidity via ebay sales: https://www.ebay.com/sch/i.html?_from=R40&_nkw=gold+eagle+coin+us+mint+%221oz%22&_sacat=0&rt=nc&LH_Sold=1&LH_Complete=1 https://www.ebay.com/sch/i.html?_from=R40&_nkw=gold+eagle+co...
  - tomalpha 6y ago
    One interesting advantage for UK buyers of gold coins specifically, is that if they're legal tender they're exempt from (Capital Gains) taxation[0]. Even if the gold content is worth significantly more than their face value, which is almost universally true. [0] https://www.royalmint.com/invest/bullion/discover-bullion/capital-gains-tax-on-investments/ https://www.royalmint.com/invest/bullion/discover-bullion/ca...
    - alasdair_ 6y ago
      This reminds me of the guy who paid his employees in silver dollars and paid taxes on the nominal value paid instead of the market price. He also ran a separate business that bought all the silver dollars back for the market price right next door. It all went well for him until he started a payroll company to do the same thing in multiple states.
      - refurb 6y ago
        Potentially kooky website (many gold bug sites are), but it has some details for anyone interested. https://www.fff.org/2013/12/09/the-u-s-vs-robert-kahre-a-horrific-miscarriage-of-justice/ https://www.fff.org/2013/12/09/the-u-s-vs-robert-kahre-a-hor...
- baconandeggs 6y ago
  It doesn't much. But you could own actual, uhm you know, gold.
  - TheOtherHobbes 6y ago
    You could, but unless you have tiny 1gm slivers you'll find it hard to buy food with it. For total meltdown SHTF scenarios soap, alcohol, cigarettes, chocolate, and maybe seeds are much more practical as barter currencies. Even without SHTF scenarios, physical gold is a poor store of value because selling physical gold to a broker is an expensive business. A lot of prestige gold coins are sold at a price premium which brokers will just ignore when buying from you. Even on weight alone, you're very unlikely to get anything close to your purchase price unless the price has gone up by at least a double figure percentage. The real question is how bad the Covid recession/depression is likely to get. If you're assuming there's a depression-scale downturn then "paper" gold makes more sense than a lot of other investment classes.
    - dmm 6y ago
      > For total meltdown SHTF scenarios There are many, many scenarios other than Business-as-usual and Mad Max. Look at how hyperinflation has played out historically. In Argentina in 2001, imported things like medicine became very expensive. People sold small amounts of gold for fiat when these kinds of expenses came up.
      - arethuza 6y ago
        To be fair my comment up thread was wondering about a failure of the financial system - which I interpreted to be more like Threads than The Big Short.
- Humphrey 6y ago
  I guess it depends on whether the company with your precious metal in a vault chooses to honour your piece of paper or not. I guess the trick is to tap the "ship me my gold now" button before Mr Robot wipes their database.
  - arethuza 6y ago
    More like whether the employees of the company who runs the vault realise that they aren't going to paid at the end of the month and simply run off with "your" gold. In a serious collapse it would seem the logical thing for them to do.
- cinquemb 6y ago
  And a lot of those papers saying that you "own" gold have similar issues compared to those that say you "own" stock/bonds… rehypothecation, leverage, liquidity, etc.
- indigochill 6y ago
  Although generally I agree with the thrust of this question, supposing someone is adequately prepared to weather the failure of the financial system to some anticipated recovery (and they are correct at predicting the recovery), then a failure is an opportunity to amass wealth by trading actual useful commodities for these bits of paper at extortionate rates, expecting to be able to collect a greater return once the recovery arrives. That said, I'm mainly playing with a hypothetical here. I'm highly skeptical the system will outright fail simply because the majority of the wealth (and thus power) belongs to those with a deeply vested interest in not letting it fail and there's generally not much power owned by those who actively want it to fail. Fiat has worked this long, so why not longer? When the chairman of the Federal Reserve becomes a prepper, then you know it's time to find a shelter.
Retric 6y ago
No, gold is a poor asset should the financial system actually fail. It’s simply a hedge because it doesn’t move the same direction as other assets.
- rapsey 6y ago
  Gold will retain its value in any financial system reboot. Paper money will not.
  - gridlockd 6y ago
    The question is will gold outperform other asset classes? Historically, gold isn't that great, but that's past performance.
    - rapsey 6y ago
      We are talking about a financial system reboot. Gold has been valuable since civilization existed. In a normal environment it will not outperform.
    - roenxi 6y ago
      > Historically, gold isn't that great, but that's past performance. Crikey. What performance counts as good in your eyes? Gold has been a pretty rewarding investment for the last 20 years. I think the median annual performance for the last 20 years has been something like 10% in USD (worthless metric for an investor I know, but the point is that most years are very solid up years). That is a pretty reasonable performer in my low-risk book. 2010-2014 represented an unusual bad time to buy gold in a decade long trend of great years to buy gold. In terms of actual return it depends when you pick your start and end date; but the fact that we sometimes have major crisis was always totally predictable and the major governments responses have been reasonably predicable. The only surprise at the moment is the specific fact that it is a pandemic and in 2020. The price pattern on the charts is not surprising.
      - Retric 6y ago
malandrew 6y ago
Guns, ammo, food and fuel are good assets to have in a collapsed economy.
- aflag 6y ago
  Food spoils too fast. Guns and ammo are not legal to purchase for most. Fuel is a better asset, but takes a lot of space. One good thing about gold is that it's compact.
  - mcny 6y ago
    What kind of fuel? Everyone I know tells me gasoline/petrol will start to go bad in six months and will start damaging my car in two years. Crude oil will last millions? of years but we would need access to a refinery and like you said takes a lot of space anyways.
    - devalgo 6y ago
      In a SHTF scenario I think the idea that you would be able to reach, operate or maintain a refinery is fanciful.
  - minerjoe 6y ago
    > Food spoiles too fast. Depends on what you mean by food. If you have enough time, food can be multiplied. One potato, properly handled, can turn into a field of potatoes. One walnut, properly handled, can turn into a forest.
    - imtringued 6y ago
      Which is why an apocalypse bunker is a pretty stupid idea. The reality is that everyone does subsistence farming again.
      - mcny 6y ago
        Speaking of apocalypse bunker, I think the movie 10 clover field lane is genius because I used to think how do people fall for seemingly obvious cult propaganda but if I woke up in a bunker and was told to comply I probably would as well. I think the idea behind an apocalypse bunker is it will remain unsafe to go outside / farm using solar power for a few months to a couple of years but not forever. I agree. You have to start farming at some point.

arethuza 6y ago

If the current financial system fails how does it help to have bits of paper saying that you "own" gold in a warehouse somewhere?

jasode 6y ago
I didn't downvote your comment but a lot of regular people do buy physical gold (coins & bars)[1] and store the precious metals in a safe. That said, I don't know how much the gold price is affected by gold ETF vs physical transactions. [1] example of gold coins that are very popular with easy liquidity: https://catalog.usmint.gov/coins/precious-metal-coins/gold/ https://catalog.usmint.gov/coins/precious-metal-coins/gold/ [2] example of liquidity via ebay sales: https://www.ebay.com/sch/i.html?_from=R40&_nkw=gold+eagle+coin+us+mint+%221oz%22&_sacat=0&rt=nc&LH_Sold=1&LH_Complete=1 https://www.ebay.com/sch/i.html?_from=R40&_nkw=gold+eagle+co...
- tomalpha 6y ago
  One interesting advantage for UK buyers of gold coins specifically, is that if they're legal tender they're exempt from (Capital Gains) taxation[0]. Even if the gold content is worth significantly more than their face value, which is almost universally true. [0] https://www.royalmint.com/invest/bullion/discover-bullion/capital-gains-tax-on-investments/ https://www.royalmint.com/invest/bullion/discover-bullion/ca...
  - alasdair_ 6y ago
    This reminds me of the guy who paid his employees in silver dollars and paid taxes on the nominal value paid instead of the market price. He also ran a separate business that bought all the silver dollars back for the market price right next door. It all went well for him until he started a payroll company to do the same thing in multiple states.
    - refurb 6y ago
      Potentially kooky website (many gold bug sites are), but it has some details for anyone interested. https://www.fff.org/2013/12/09/the-u-s-vs-robert-kahre-a-horrific-miscarriage-of-justice/ https://www.fff.org/2013/12/09/the-u-s-vs-robert-kahre-a-hor...
baconandeggs 6y ago
It doesn't much. But you could own actual, uhm you know, gold.
- TheOtherHobbes 6y ago
  You could, but unless you have tiny 1gm slivers you'll find it hard to buy food with it. For total meltdown SHTF scenarios soap, alcohol, cigarettes, chocolate, and maybe seeds are much more practical as barter currencies. Even without SHTF scenarios, physical gold is a poor store of value because selling physical gold to a broker is an expensive business. A lot of prestige gold coins are sold at a price premium which brokers will just ignore when buying from you. Even on weight alone, you're very unlikely to get anything close to your purchase price unless the price has gone up by at least a double figure percentage. The real question is how bad the Covid recession/depression is likely to get. If you're assuming there's a depression-scale downturn then "paper" gold makes more sense than a lot of other investment classes.
  - dmm 6y ago
    > For total meltdown SHTF scenarios There are many, many scenarios other than Business-as-usual and Mad Max. Look at how hyperinflation has played out historically. In Argentina in 2001, imported things like medicine became very expensive. People sold small amounts of gold for fiat when these kinds of expenses came up.
    - arethuza 6y ago
      To be fair my comment up thread was wondering about a failure of the financial system - which I interpreted to be more like Threads than The Big Short.
Humphrey 6y ago
I guess it depends on whether the company with your precious metal in a vault chooses to honour your piece of paper or not. I guess the trick is to tap the "ship me my gold now" button before Mr Robot wipes their database.
- arethuza 6y ago
  More like whether the employees of the company who runs the vault realise that they aren't going to paid at the end of the month and simply run off with "your" gold. In a serious collapse it would seem the logical thing for them to do.
cinquemb 6y ago
And a lot of those papers saying that you "own" gold have similar issues compared to those that say you "own" stock/bonds… rehypothecation, leverage, liquidity, etc.
indigochill 6y ago
Although generally I agree with the thrust of this question, supposing someone is adequately prepared to weather the failure of the financial system to some anticipated recovery (and they are correct at predicting the recovery), then a failure is an opportunity to amass wealth by trading actual useful commodities for these bits of paper at extortionate rates, expecting to be able to collect a greater return once the recovery arrives. That said, I'm mainly playing with a hypothetical here. I'm highly skeptical the system will outright fail simply because the majority of the wealth (and thus power) belongs to those with a deeply vested interest in not letting it fail and there's generally not much power owned by those who actively want it to fail. Fiat has worked this long, so why not longer? When the chairman of the Federal Reserve becomes a prepper, then you know it's time to find a shelter.

Retric 6y ago

No, gold is a poor asset should the financial system actually fail. It’s simply a hedge because it doesn’t move the same direction as other assets.

rapsey 6y ago
Gold will retain its value in any financial system reboot. Paper money will not.
- gridlockd 6y ago
  The question is will gold outperform other asset classes? Historically, gold isn't that great, but that's past performance.
  - rapsey 6y ago
    We are talking about a financial system reboot. Gold has been valuable since civilization existed. In a normal environment it will not outperform.
  - roenxi 6y ago
    > Historically, gold isn't that great, but that's past performance. Crikey. What performance counts as good in your eyes? Gold has been a pretty rewarding investment for the last 20 years. I think the median annual performance for the last 20 years has been something like 10% in USD (worthless metric for an investor I know, but the point is that most years are very solid up years). That is a pretty reasonable performer in my low-risk book. 2010-2014 represented an unusual bad time to buy gold in a decade long trend of great years to buy gold. In terms of actual return it depends when you pick your start and end date; but the fact that we sometimes have major crisis was always totally predictable and the major governments responses have been reasonably predicable. The only surprise at the moment is the specific fact that it is a pandemic and in 2020. The price pattern on the charts is not surprising.
    - Retric 6y ago

malandrew 6y ago

Guns, ammo, food and fuel are good assets to have in a collapsed economy.

aflag 6y ago
Food spoils too fast. Guns and ammo are not legal to purchase for most. Fuel is a better asset, but takes a lot of space. One good thing about gold is that it's compact.
- mcny 6y ago
  What kind of fuel? Everyone I know tells me gasoline/petrol will start to go bad in six months and will start damaging my car in two years. Crude oil will last millions? of years but we would need access to a refinery and like you said takes a lot of space anyways.
  - devalgo 6y ago
    In a SHTF scenario I think the idea that you would be able to reach, operate or maintain a refinery is fanciful.
- minerjoe 6y ago
  > Food spoiles too fast. Depends on what you mean by food. If you have enough time, food can be multiplied. One potato, properly handled, can turn into a field of potatoes. One walnut, properly handled, can turn into a forest.
  - imtringued 6y ago
    Which is why an apocalypse bunker is a pretty stupid idea. The reality is that everyone does subsistence farming again.
    - mcny 6y ago
      Speaking of apocalypse bunker, I think the movie 10 clover field lane is genius because I used to think how do people fall for seemingly obvious cult propaganda but if I woke up in a bunker and was told to comply I probably would as well. I think the idea behind an apocalypse bunker is it will remain unsafe to go outside / farm using solar power for a few months to a couple of years but not forever. I agree. You have to start farming at some point.