Storing Physical Gold - Coins etc.

[aus_trader]

And if you bought gold at $1800, you are much worse off than the guy that just held cash under the bed,

And the guy that held the cash in a term deposit beat the guy that held it under the bed

And the guy that owned diversified productive assets eg real estate or property index fund killed them all.

I think gold did it's job of appreciating in value at the time of crisis and once things settled down, gold has fallen back to a more reasonable valuation. Things have settled down but not everything is fixed in my opinion and when the bandages that hold everything together start to come loose, gold may play it's part to appreciate in value and may preserve the small part of one's wealth that is held in gold.

 

[aus_trader]

I think his scenario depends on him the capitalist being able to move his capital to where the liberators cannot sanction and choke off the economy. Which is true if you have capital/wealth/asset you can invest rather than earn through labour.

Maybe that's why capitalists doesn't much care for climate change. There's always New Zealand, or Mars.

Reminds me what Phillip Fisher was saying about stock investment... it's great, don't be afraid of a war scare because... well, because if war does come (to America), all assets are going to be useless anyway.

Maybe gold and a few ammo.

Yeah, I think it's a bit dangerous to purely adopt Buffet ways in this day and age. Phillip Fisher, who first introduced the idea of buying quality companies and never selling, the idea which Buffet later adopted and refined has done well in the ever expanding stock valuations.

In my opinion stocks and other financial assets may deflate to a more reasonable valuation should the level of money supply due to printing slow down or cease. So I am cautious and although I hold some stocks (which are displayed in ASF), none of the stocks/funds are of 'forever hold' status.

So I believe it's good to have some diversification into other asset classes, including even a small % into precious metals such as gold and silver.

 

[jesser]

Just able to hold value is OK, doesn't have to be income producing (pay interest/dividends etc) or have capital growth.

The problem is that despite what others are telling you here, gold is one of the riskiest mainstream assets based on its volatility. Gold is currently in a ~35% drawdown and it has experienced multiple drops of over 50%, with at least one higher than 80%! Think about that - that's most of your "insurance" asset wiped out, requiring a 400% gain to just to get back to even. Worse still, it typically takes decades for gold to bounce back.

...less harmed financially in crisis situations such as GFC or worse. We don't know when that may happen but it's good to prepare right?

If you're looking to gold to protect you through events like the GFC, you're going to be disappointed. Gold spent most of 2008 in a general decline. Compare that to say the oil crisis of the '70s where gold skyrocketed.

So now you've got a two-part prediction problem. 1 - Of the many adverse events and crises that could occur, which ones do you want to prepare for? 2 - Can you predict whether the "insurance" investments and assets that you purchase will be positively or negatively affected?

Your goal is admirable, and yes, one we should all be striving for. Thanks. It's just that gold may not perform the way you and others think it does.

 

[aus_trader]

Trick question, if your dodgy neighbour made it over the fence, would your gold still be preserved?

you have much more risk of gold being stolen than a world war resulting in land being taken.

But as I said

A growing portfolio of assets that grows in size and diversity over time is the best way to preserve wealth ... and spreading across different assets and industries, and geographies, it is much more likely to be "preserved".

No reason why the crown estate (or you) can't own assets all over the world.

I think it's worth looking into, so it's good you broaden the view of thinking here. Sometimes it's easy to kind of push real estate investing out of your asset class considerations if I'm only considering the capital cities of Australia which tends to be pretty expensive.

By the way the Royal's are quite fond of their gold as well, see the Queen inspecting her family stash.

 

[aus_trader]

View attachment 88490

Adjusting for inflation, the value of gold was range-bound for the last two hundred years with a couple of substantial spikes in recent decades.

If you're buying purely for "insurance" then that may be reasonable. But gold is not historically a long-term wealth-preservation asset. There are far too many times where if you had purchased gold you would have lost substantial wealth decades later, no matter how many currency downturns you had successfully rode through.

Also, if you're buying gold believing that there may be a downturn "soon-ish", you're really just trying to time-the-market broadly. And if you're smart enough to time markets, there are far better ways to make and keep wealth than buying physical gold.

jesser this is just the graph we are after for discussion, thanks for posting. Charts tell a story and this one is no exception. If we are investing based on historical price data and reversion to the mean, gold would be a horrible investment at the moment and one should be selling any gold they hold onto the market in order to buy back at $500 average.

Have a look at the recent peaks though, do you see the reaction to times of financial crisis/uncertainty? Is the path paved by the financial institutions of the world a lovely yellow brick road, if so there is no case for gold, I rest my case. Or is there humps and bumps along the way, where hard assets like gold may preserve a small portion of your portfolio if some of the financial assets get a hit or there's a write-down?

 

[aus_trader]

The problem is that despite what others are telling you here, gold is one of the riskiest mainstream assets based on its volatility. Gold is currently in a ~35% drawdown and it has experienced multiple drops of over 50%, with at least one higher than 80%! Think about that - that's most of your "insurance" asset wiped out, requiring a 400% gain to just to get back to even. Worse still, it typically takes decades for gold to bounce back.



If you're looking to gold to protect you through events like the GFC, you're going to be disappointed. Gold spent most of 2008 in a general decline. Compare that to say the oil crisis of the '70s where gold skyrocketed.

So now you've got a two-part prediction problem. 1 - Of the many adverse events and crises that could occur, which ones do you want to prepare for? 2 - Can you predict whether the "insurance" investments and assets that you purchase will be positively or negatively affected?

Your goal is admirable, and yes, one we should all be striving for. Thanks. It's just that gold may not perform the way you and others think it does.

Yes it is a difficult instrument to predict, specially given the spot price is affected by so many factors such as amount of supply from mines, amount in circulation and what's the demand, how much goes into the few uses of gold such as electronic circuitry and jewelry etc.

It is a liquid (in terms of buying and selling) asset that is attractive during times of crisis, compared to say real estate that will take a long time to advertise and sell to get a good price based on valuation.

 

[explod]

Thanks for the info explode, are you talking about Aussie coins, when you say Silver coins?

Yes A/T

And as a collector no accounting or tax implications unless you are exchanging high volume.

 

[luutzu]

Yeah, I think it's a bit dangerous to purely adopt Buffet ways in this day and age. Phillip Fisher, who first introduced the idea of buying quality companies and never selling, the idea which Buffet later adopted and refined has done well in the ever expanding stock valuations.

In my opinion stocks and other financial assets may deflate to a more reasonable valuation should the level of money supply due to printing slow down or cease. So I am cautious and although I hold some stocks (which are displayed in ASF), none of the stocks/funds are of 'forever hold' status.

So I believe it's good to have some diversification into other asset classes, including even a small % into precious metals such as gold and silver.

I think Buffett does buy/trade in commodities when the value is there. He made a few hundred millions, from memory a decade or so ago, in silver etc.

I guess you'd only hold onto things forever if it provide good returns and you don't need the cash for other opportunities or emergencies.

 

[Value Collector]

I think it's worth looking into, so it's good you broaden the view of thinking here. Sometimes it's easy to kind of push real estate investing out of your asset class considerations if I'm only considering the capital cities of Australia which tends to be pretty expensive.

By the way the Royal's are quite fond of their gold as well, see the Queen inspecting her family stash.
View attachment 88491

HAHAHA, that is not the queens gold. that is the queen inspecting the reserve banks gold, which has nothing to do with the Crown estate, or any of her private estate, nice try though.

 

[Value Collector]

By the way the Royal's are quite fond of their gold as well, see the Queen inspecting her family stash.
View attachment 88491

Again, not her gold, the bank of England owns that gold.

 

[aus_trader]

HAHAHA, that is not the queens gold. that is the queen inspecting the reserve banks gold, which has nothing to do with the Crown estate, or any of her private estate, nice try though.

OK I think you may be right on that. But the Brits seem to place importance and value in their gold holding. Does RBA have a similar structure? In other words is there a good amount of gold backing to the plastic money newly issued ?

With US, since they went off the gold standard they have been able to print money at will without being backed by gold. Previous Fed chairman Alan Greenspan actually says it, probably by a slip of his tongue (see the other Gentleman's reaction as Greenspan's comments come out)

https://www.youtube.com/embed/q6vi528gseA

 

[Value Collector]

Does RBA have a similar structure?

Yes, they hold some gold as well as other assets.

With US, since they went off the gold standard they have been able to print money at will without being backed by gold.

Thats a good thing, the money supply should be able to expand and contract with the economy, why would we want to restrict the supply of money to the arbitrary supply of a metal, money is there as an IOU to facilitate trade.

If anyone wants to convert their cash to a metal they can do so, there is no need for the government to do it.

There is severe draw backs to a gold backed system.

Previous Fed chairman Alan Greenspan actually says it, probably by a slip of his tongue

Its not a slip of the tongue, its fact.

 

[aus_trader]

Yes, they hold some gold as well as other assets.

That's good to know.

With ability to print money at will for facilitate trade argument doesn't go down well with my way of thinking. A nation's money supply should be reflective of that nation's sovereign wealth and there should be limitations on it's supply to preserve the value of the notes/coins issued in this case the greenback. When I say preserve the value I mean buying power, so more and more money will be needed to buy the same good or service as money supply increases. This can cause inflation and as mentioned by some of the earlier comments a possible hyper inflation scenario in the future.

 

[Value Collector]

A nation's money supply should be reflective of that nation's sovereign wealth.

A nations real "wealth" is not linked to how much gold they have buried in vaults collecting dust.

A nations real "wealth" is related to the amount of productive assets its holds generating real tradable Products and services, and "Money" is just something we use to facilitate that process.

eg. There is a solid reason that Spain didn't become a world power for long even though it discovered and controlled the South American gold mines, and was the biggest producer of gold, it's focus on mining gold distracted it from building a real producing and manufacturing economy such as the Brits did in Britain and North America.

and there should be limitations on it's supply to preserve the value of the notes/coins issued in this case the greenback.

Sure, but why should that limitation be linked to gold,

When I say preserve the value I mean buying power, so more and more money will be needed to buy the same good or service as money supply increases. This can cause inflation and as mentioned by some of the earlier comments a possible hyper inflation scenario in the future

A little bit of inflation is good (2%), its a buffer against deflation which is a far worse evil than inflation, and steady 2% inflation rate is a good incentive to avoid stock piling cash, and instead put that capital to work in real assets that produce real "wealth" for the nation.

If you haven't done so already, I recommend reading "Adam smiths wealth of nations", he covers this topic very well, and given the book was written over 230 years ago its a good historical account of the real world troubles with the good system, and he points out the fatal flaws in the Spanish vs English/American economies (it was actually written before America separated from Britain)

 

[aus_trader]

A little bit of inflation is good (2%), its a buffer against deflation which is a far worse evil than inflation, and steady 2% inflation rate is a good incentive to avoid stock piling cash, and instead put that capital to work in real assets that produce real "wealth" for the nation.

Agree. A 2 - 3% inflation is good and it even makes people feel good, not just the economic impact. That's because people can see that things go up slowly over time such as their investments which offsets the costs rising when purchasing good and services. I am not trying to predict the future in any way but hope this targeted range holds up for the foreseeable future to mitigate unforeseen consequences.

I'll have a read of Adam Smiths book. Historical books are some of the best that have been written.

 

[jesser]

It is a liquid (in terms of buying and selling) asset that is attractive during times of crisis, compared to say real estate that will take a long time to advertise and sell to get a good price based on valuation.

Yep, gold is far more liquid than real estate. Keep in mind that the price spread on physical gold can be relatively high at 5-10% for online discount brokers (depending on how much you want to buy). And higher for premium sellers. Those transaction costs can wipe out years of gains, so it's not something you want to be jumping in and out of just because it's liquid. In your case, you're buying-and-holding/storing for the long-term to weather adverse events, so it doesn't sound like it would be a major concern.

But if high liquidity is a requirement, there are far better securities you could use for hedging.

 

[luutzu]

A nations real "wealth" is not linked to how much gold they have buried in vaults collecting dust.

A nations real "wealth" is related to the amount of productive assets its holds generating real tradable Products and services, and "Money" is just something we use to facilitate that process.

eg. There is a solid reason that Spain didn't become a world power for long even though it discovered and controlled the South American gold mines, and was the biggest producer of gold, it's focus on mining gold distracted it from building a real producing and manufacturing economy such as the Brits did in Britain and North America.


Sure, but why should that limitation be linked to gold,



A little bit of inflation is good (2%), its a buffer against deflation which is a far worse evil than inflation, and steady 2% inflation rate is a good incentive to avoid stock piling cash, and instead put that capital to work in real assets that produce real "wealth" for the nation.

If you haven't done so already, I recommend reading "Adam smiths wealth of nations", he covers this topic very well, and given the book was written over 230 years ago its a good historical account of the real world troubles with the good system, and he points out the fatal flaws in the Spanish vs English/American economies (it was actually written before America separated from Britain)

Was that Smith's thesis as to the causes of the wealth of nations?

ey, I heard from Chomsky, and I agree with him on this, not sure what Smith thoughts on it were...

But according to Chomsky's reading of history, a nation's wealth does not come from it following the ideas of "natural competitive advantage".

I think Chomsky was referring to Smith, or at least the neoLiberals ideas, of nations needing to deliver/produce what they're (currently) good at. I think Chomsky like Smith... but point is he said that any nation that follow Smith's idea regarding that specialisation will end up poor and disadvantaged.

Examples given were... one, the United States. Its main trades around the pre-revolutionary wars were agricultural. Farming, skinning racoon, fishing and stuff.

So if the US were to follow that specialisation, it would be liberated by the French or Spaniards instead of the reverse.

Same with Britain. Its textile industry were nowhere competitive against Eqypt or India's but since Britain militarily ruled over them, they were assigned certain specialisation other than those they're good at... while back home the Poms subsidise and made those innovation possible.

It's the same with US planners after WWII where they assign, literally, different region of the world their duties.

So a country that fall into the belief that if they're to do what they're good at... they end up being third world countries, and stay there. Well, unless they're a Singapore maybe.

Anyway, interesting stuff.

 

[Value Collector]

Was that Smith's thesis as to the causes of the wealth of nations?

ey, I heard from Chomsky, and I agree with him on this, not sure what Smith thoughts on it were...

But according to Chomsky's reading of history, a nation's wealth does not come from it following the ideas of "natural competitive advantage".

I think Chomsky was referring to Smith, or at least the neoLiberals ideas, of nations needing to deliver/produce what they're (currently) good at. I think Chomsky like Smith... but point is he said that any nation that follow Smith's idea regarding that specialisation will end up poor and disadvantaged.

Examples given were... one, the United States. Its main trades around the pre-revolutionary wars were agricultural. Farming, skinning racoon, fishing and stuff.

So if the US were to follow that specialisation, it would be liberated by the French or Spaniards instead of the reverse.

Same with Britain. Its textile industry were nowhere competitive against Eqypt or India's but since Britain militarily ruled over them, they were assigned certain specialisation other than those they're good at... while back home the Poms subsidise and made those innovation possible.

It's the same with US planners after WWII where they assign, literally, different region of the world their duties.

So a country that fall into the belief that if they're to do what they're good at... they end up being third world countries, and stay there. Well, unless they're a Singapore maybe.

Anyway, interesting stuff.

Not sure how you could read wealth of nations and come away thinking that the USA should only specialize in farming and skinning raccoons.

He said capital should flow to where it is most productive, given the endless plains available in America at the time, and the fact you could buy land for next to nothing, farming and other primary industries were the best use of capital, which the produce could be traded with Europe for cheaper manufactured goods, but his ideas was always that as capital accumulated, it would saturate the primary industries and other secondary industries would become attractive.

 

[aus_trader]

Yep, gold is far more liquid than real estate. Keep in mind that the price spread on physical gold can be relatively high at 5-10% for online discount brokers (depending on how much you want to buy). And higher for premium sellers. Those transaction costs can wipe out years of gains, so it's not something you want to be jumping in and out of just because it's liquid. In your case, you're buying-and-holding/storing for the long-term to weather adverse events, so it doesn't sound like it would be a major concern.

But if high liquidity is a requirement, there are far better securities you could use for hedging.

It's more of a store of wealth asset than an instrument for trading for short term gains, the way I see. So a slightly higher cost for buying and selling is acceptable.

 

[aus_trader]

Just want to say the last few days have been great in terms of responses to this thread. There is a lot of information to digest and a lot to think about. I'll update if I come across any important material as I study this investment option further, so keep posting if there's any developments or other wealth preservation related information.

While digesting this subject, I will keep up with the stock portfolio updates, which got a little neglected the last couple of days. Today added a dividend paying stock poised for growth to the Speculative Stock Portfolio, details on that thread...