Treat Gold like insurance — and hope things don’t get so bad that you actually have to use it.
They have never been worth nothing. This makes them good hedges against complete Armageddon and system wide meltdowns.
But as an investment, I'm not sure. Both are at or near all time highs. They could go up more. They could go down.
I wouldn't hesitate to recommend putting a small percentage of your long term investment money in gold or silver. I'm talking about real, physical gold or silver that you can keep in your safe at home. There's some security in knowing that if everything melts down completely, you've got something valuable to fall back on.
As for "paper gold" like the exchange traded GLD and SLV, I'm less enthusiastic. Again, they are trading near all time highs. And if the whole system implodes, electronic or paper shares of GLD and SLV won't buy you much in a bartering society.
And for the "Armageddon" hedge at home, don't forget the lead. As others have pointed out, 5.56mm, 7.62mm, .45acp, .357 magnum denominations are both useful and valuable for barter in a post meltdown society.
When things get really rough people will be using gold as money. But there will be no way to distinguish good gold from from junk gold. So all gold will be treated as junk. Pure gold will be the same as 14K gold. Don't waste money on pure gold.
That advice isn't something I'm just making up. That's from someone that has actually lived through the crisis in Argentina. Check out his blog at Surviving in Argentina.
If the economy recovers, there is simply no way for the government to remove all the cash they've pumped into the system and inflation will result. If it doesn't recover the government will continue to pump money into the system until it does.
Either way, Gold will go up. It's not going to be a straight run... it will have its peaks and troughs, but in general over the next 12 to 24 months a gold purchase isn't a bad idea.
my 2c:
I have long denigrated “gold bugs”. In a sense, I still do, but I define “gold bug” not as “someone who believes gold is a good investment”, but rather the paranoid sort that envision themselves shaving off a li’l sliver of their gold Double Eagle to buy a loaf of bread, and stuff like that. If that’s your take on the America of the Future, buy ammo instead. If it comes to that I’ll be happy to trade you bread for bullets, but I won’t be needing gold.
In my humble opinion, we are headed for an inflationary period once we exit the DEflationary period we are now in. This will be the inevitable result of the Government screwing up the economy.
While I see this outcome as inevitable, there are three unknowns that become parameters in my strategy for coping with it: the timing of the inflationary upturn, the “shape” of the deflationary bottom (flat, U-shaped, V-shaped), and the severity of the ensuing inflation: moderate (i.e. US in the ‘70s), severe (Argentina in the ‘80s), or hyper (Weimar republic in the early thirties, Zimbabwe recently).
My guess is, the bottom will be more or less flat, and about 12 to 24 months in duration. I think the ensuing inflation will qualify as moderate — more or less on par with the Carter years (15%), but maybe a little more severe (20% to 30% peaks). This is ONLY a guess, subject to frequent re-evaluation. Really, no one can do anything BUT guess, because — no matter what anyone tells you — no one knows for sure how this will play out. Keep your eyes open.
If the financial systems remain more or less intact as we endure the deflation followed by the inflationary period, you don’t necessarily NEED gold, just investments that keep up with inflation. In my opinion oil, for example, is “good as gold”. And there are many others. In general, certain equities of companies with pricing flexibility will do OK (better than cash, for sure). Gold may have a place in my portfolio, but it probably won’t be the centerpiece. If you are buying gold for this reason under these conditions, it seems the ETF is just as good as bullion, and much more convenient.
If you believe that significantly more inflation (and/or social chaos) is in store, then it might be prudent to have even more gold in your “portfolio”, and it might make sense to hold some or even all of it as bullion.
I am planning to add a little gold very carefully over the next 12 to 24 months. Just for grins, a little of it will be in bullion. I’ll be keeping it in my home at 123 W. 4th Street, Detroit, Michigan, and counting it every night to make sure it’s still there (I work all day, and can’t afford an alarm system or a dog). HA HA just kidding about that last part, I’ll be keeping my bullion in a safe deposit box.
When I say “add slowly” I mean I’ll be adding slowly; I fully expect the price of gold to dip significantly during the next 12 months as more bad news comes out and we endure more deflation. Adding slowly and dollar cost averaging will guard against paying too much — at the risk of REALLY paying too much if the onset of inflation is sudden and unpredictable (which, again, I don’t think it will be).
For what it’s worth—
FRegards
Who will buy the gold you have?
What will they pay for it?
How much is it still worth to you?
In a dire crisis, gold cannot be eaten or used to build shelters. Gold will make you a target of predators financially and physically.
Likewise, I've done well with my firearms purchases. The .50 cal. rifle I bought in 1988 for $490.00 at Brandon's in Sacramento would easily go for upwards of $1500-$2000 these days.
But, like the gold and silver, my principle motivation in purchasing the rifle was not as a financial investment.
Do not buy it thinking it is one.
L
Gold is a store of value. It's value relative to goods it can buy has stayed constant for thousands on years. If you look at it that way, having some gold can be a good long term hedge if you think the economy will get worse in the future.
The way I see gold, it’s a way to protect your money from extreme loss, like if there is hyperinflation coming. I think the high price of gold right now might be reflecting the sentiments of investors that there is substantial risk of significant inflation. I don’t have money to invest, but if I did, I think I would buy land. I haven’t checked lately, but I imagine land prices have generally come down along with real estate. They ain’t making any more of it, so it just seems like a good investment to me, except that you have to pay property taxes on it :-(.
The last time there was a big finacial crisis (around 1979-1980 when Carter was pres. gold went up around $600. After Regan was elected it went back down to the $400 range. So if you tried to preserve some of your assets back then, you would have lost about 1/3 if you bought when gold was high. The same thing could happen now. If you bought gold back in 1999-2000, you’d be doing great right now.
Gold will be tricky. The logic of the current economic situation, or rather, the government’s treatment of it suggests that there will be a gold confiscation this year or early next. Any gold you own that is not in your physical position will disappear as will gold stored in bank deposit boxes. Storing it at home makes your home a target, especially if you have mentioned the subject to anyone you know or who knows you. Storing it elsewhere leaves it out of your immediate control. Also, any serious effort by the government to confiscate gold could easily include house searches with airport wands which will find your gold and your guns.Avoiding gold will leave you in the lurch when the money evanesces or goes to Zimbabwe.
I would submit that Gold is not an investment. It is a store of value. A gold mine would be an investment.
An ounce of of gold usually costs about the same as a high quality men’s suit. It was true in 1800, 1900, 1950 and is true today. It will probably continue to be true for a long time. It doesn’t rise in value but it keeps its value very reliably over time. Of course the price has some volatility in it, but the peaks and valleys average out eventually.
So, depending on the point you’re at in your retirement plan, there’s something to be said for preserving principal instead of focusing on growth. If you have enough to live on for the rest of your life, then it may be time to think about minimizing risk.
But it’s not technically an investment. It won’t appreciate in real value.
As others have pointed out, in the end-of-world scenario gold isn’t really all that handy a thing to have around. In fact it’s harder to trade for simple needs than many other commodities. It’s a wildly impractical currency. Gonna try to buy a gallon of milk with gold? Not handy at all. :-)
My investments right now are shifting. I’ve been sitting on cash for quite a while. But now I’m getting back into the stock market. There are some *epic* bargains to be had right now. Sure, some of them may go down a little further, but in ten years they’ll be back up on the pre-crash curve. In twenty years I should be able to feel like a genius. :-)
Nah. Historically, gold has a long track record of mediocre performance. Average rates of return since the Napoleonic era are about 2% per year. In recent years, gold has a 50-year track record of about 4.4% per year ... about the same as inflation, and slightly less than a savings account.
A growth stock mutual fund would’ve made about 12% during the same time period. Ultimately, markets are cyclical — they will bounce back. Now is a perfect buy-low opportunity in the market — an opportunity for bargains this good don’t come along too often. I certainly wouldn’t sell anything (selling low is a fool-proof way of locking in a loss) — and I might consider buying.
Gold is also not particularly useful in a failed economy. If an economy truly fails, barter is far more valuable than gold ... real estate, food and skills/knowledge are what keep value if an economy fails.
SnakeDoc
You are embarking on your investment journey in a very wise way by seeking the counsel of others before proceeding. Good for you.
Gold is in a competitive matrix with our investments and its relative attractiveness varies over time. It would be misguided to think of investing in gold as an “either/or” type of choice.
Gold’s place in the investment universe is as an alternative to National paper currencies (U.S. Dollar, Japanese Yen, etc.). For U.S. based investors investing in Gold has been, at different times, a bad investment and at different times a good investment.
Gold, unlike many other competing investments, does not earn interest while it is being held (unless you are a huge buyer who is then in a position to lend Gold for interest). In times of a soundly managed U.S. dollar Gold is an inferior investment to interest bearing alternatives. In times of poorly managed U.S. dollar such as the 1973 - 1981 period Gold outperforms most conventional investment products.
We are in a special situation now with respect to the U.S. Dollar. We are in the middle of an epic crackup of the Dollar-based montetary system that has been in place since the end of World War II. The outlook is murky but higher inflation and general turmoil seem to be a certainty. In this climate moving the percentage of one’s portfolio in gold from 5% to 35%/40% would look to provide strong capital gains over the next several years.
I am putting the rest of my portfolio into beaten down energy shares and Triple-A corporate bonds which I feel will weather the coming storm. While I like to the currency insulation provided by Gold I do not want to completely lose interest and dividend income.
I bought a .1 oz coin for $102 on 12/22. I could sell it today for $124. Not a bad return over six weeks.
Dollar cost averaging is a good idea. You think there is not going to be inflation with more than 2 trillion dollars being pumped into the economy?
Not a good idea to put all of your eggs in a gold basket, but it doesn’t take much time to accumulate several thousand dollars in coin. Use a safe, and don’t tell anyone that you have it. Especially your neighbors or members if internet forums.
Reference bump. ;-)
i am interested
Seriously, to me, gold, silver, and other metals are a sensible investment. As you said, they are a hedge against inflation and weak currency. They're also portable and you can keep them with some degree of anonymity. I can't say that 30% is a good number - for me, that's high.
Another good investment is ammunition, which the left would like to make scarce and which will probably be more useful than precious metals in times of Armageddon.