Storing Physical Gold - Coins etc.

[Value Collector]

I found this video informative when I watched it a few years ago, it explains alot about the operation of the federal reserve and debunks at lot myths, is a multiple part video.

This is part 1.

 

[aus_trader]

This is part 1.

Good video, just goes to show the complex nature of balancing the shocks to the economy by the central banks. Also I now understand more of the reasoning behind dropping the gold standard. All done with good intentions according to Bernanke and I can see his point.

It'll be interesting to see if they can control the shocks the way they have with a 2-3% inflation going into the future.

 

[Value Hunter]

Value Collector I understand what you are saying about diversifying assets by geography and asset class but there are important differences between productive assets and gold. If you live in a basket case country that country may choose to institute capital controls or impose punitive wealth taxes, so if you have assets overseas you may not get access to them for a long time. Also the titles to shares, property etc rely on the electronic record keeping system. If all the computers/electricity, etc went down that would pose problems for it, not to mention database hacking, etc. Furthermore gold can be owned without leaving a paper trail (privacy is useful) meaning if you get into financial trouble with creditors, ex wives, the tax office, police state/dictatorship government, etc they might not even know you own the gold, while they will surely know what shares and properties you own.

 

[Value Collector]

Value Collector I understand what you are saying about diversifying assets by geography and asset class but there are important differences between productive assets and gold. If you live in a basket case country that country may choose to institute capital controls or impose punitive wealth taxes, so if you have assets overseas you may not get access to them for a long time. Also the titles to shares, property etc rely on the electronic record keeping system. If all the computers/electricity, etc went down that would pose problems for it, not to mention database hacking, etc. Furthermore gold can be owned without leaving a paper trail (privacy is useful) meaning if you get into financial trouble with creditors, ex wives, the tax office, police state/dictatorship government, etc they might not even know you own the gold, while they will surely know what shares and properties you own.

As I said its only good for insuring tail risks, but it is extremely expensive insurance for something which for most of us, is a very low risk problem.

Not to mention "basket case countries" have often seized private gold holdings, off course you can hide it under your bed, but then you have a risk of theft by outsiders or even that crazy wife just before she becomes your ex.

To be honest, I have always felt the best defence against a wife taking all you money is grow such a large asset base that it won't matter if you have to give her half.

eg. Instead of hiding $50,000 of gold from her incase she divorces you in 10 or 15 years, I would rather grow that $50,000 into $250,000 so even if I have to spilt it, I still end up with more, and if we don't divorce, we have a sizeable productive asset to enjoy.

 

[Value Hunter]

The other good thing about gold is liquidity of high quality physical gold (LBMA gold in the right sizes) is very consistent.

Stock and property markets might be liquid enough in normal times but in crises periods liquidity can dry up, stock exchanges can be closed, etc. Also property usually takes months to turn into cash. Shares take days to turn into cash in normal times (longer when liquidity dries up or trading is halted). You can pretty much always turn a modest amount of gold into cash (or barter it for other goods in the case of a currency collapse) within hours.

If you look at history the wealthy elite, central banks, etc, have long had some allocation to gold. Most central banks still own some gold, as do many billionaires.

J.P. Morgan once said "gold is money, everything else is credit". With productive assets you are relying on the performance of other people tenants to pay the rent (properties), the company to not go bankrupt and be able to pay its interest (bonds), the company to prosper i.e. grow its earnings or pay dividends (shares), the government/central banks not to hyper-inflate the currency (fiat currencies). With commodities (especially so with gold) you are not relying on 3rd party performance, rather you are betting that the commodity will maintain its intrinsic usefulness/value (i.e. betting that people will still eat food, people will still drink alcohol, people will still value gold, etc).

All of that being said, we are for the most part in agreement that gold is insurance against tail risks (as well as functioning as money).

 

[Value Hunter]

Value Collector earlier in the thread you made the point that if a family compounded $1 at 2% per annum starting 5000 years ago, today they would own the entire world. This is mathematically true.

This illustrates perfectly the point that any types of productive investment over a long enough time horizon will experience some kind of catastrophic event (e.g. companies will go bankrupt, governments will default on their bonds, land will be expropriated through warfare, or divorce, etc.). If this were not the case a small number of families would own the entire world. Over a long enough time horizon (multiple generations) the tail risks that gold are designed to protect against are likely to occur at some point. Hence their is a valid argument to be made that it is prudent to store a small percentage of your wealth in gold.

 

[TikoMike]

Hi Value Collector, not having a go at you at all but you said in past comments that hyperinflation or that a sharp decline in our fiat currency is very low risk. With Labor gaining ground, and with Shorten's socialist policies, with Penny Wong wanting to increase our foreign "aid" to record levels, with our debt levels being as high as they are and also at record levels, Labor's attack on big businesses (therefore likely that big business might just pack up and leave and take their jobs/employment with them them) and Labor's belief that trickle down economics don't work etc etc, I would love to hear your thoughts on why you think it's very low risk for our country.

 

[aus_trader]

Hi Value Collector, not having a go at you at all but you said in past comments that hyperinflation or that a sharp decline in our fiat currency is very low risk. With Labor gaining ground, and with Shorten's socialist policies, with Penny Wong wanting to increase our foreign "aid" to record levels, with our debt levels being as high as they are and also at record levels, Labor's attack on big businesses (therefore likely that big business might just pack up and leave and take their jobs/employment with them them) and Labor's belief that trickle down economics don't work etc etc, I would love to hear your thoughts on why you think it's very low risk for our country.

Just to add to your comments we have to remember that Australia was somewhat shielded from the GFC since we were in the thick of the mining boom at that time and still our stock market took a massive hit (still to make an all time high since GFC). All the money taken out of the stock market and profits rolling in from mining probably got re-allocated into property as it went into fresh highs, doubling or more in some spots.
However with bulk commodity prices coming off the boil, that shielding may not be there in a similar crisis today. Hence the case for having a small portion of a portfolio in defensive and wealth preserving assets such as gold is justifiable I think.

 

[Value Collector]

Value Collector earlier in the thread you made the point that if a family compounded $1 at 2% per annum starting 5000 years ago, today they would own the entire world. This is mathematically true.

Yes, that was just a thought experiment to show that "Holding Value" is far less important Than "growing Value"

This illustrates perfectly the point that any types of productive investment over a long enough time horizon will experience some kind of catastrophic event (e.g. companies will go bankrupt, governments will default on their bonds, land will be expropriated through warfare, or divorce, etc.).

Gold is exposed to the same risks.

If this were not the case a small number of families would own the entire world.

No really, because in reality families spend the earnings, and don't have the goal of compounding for 5000 years.

Take a look at the English royal family, they have lived off the crown estate for 1000 years, with out shrinking the estate at all, You can't live of a pile of gold without shrinking it

Over a long enough time horizon (multiple generations) the tail risks that gold are designed to protect against are likely to occur at some point. Hence their is a valid argument to be made that it is prudent to store a small percentage of your wealth in gold.

As I said, the best defence against those risks is an asset base that grows in size and diversity.

But we can agree to disagree, I am not much fussed to begin a longwinded debate.

 

[Value Collector]

Hi Value Collector, not having a go at you at all but you said in past comments that hyperinflation or that a sharp decline in our fiat currency is very low risk. With Labor gaining ground, and with Shorten's socialist policies, with Penny Wong wanting to increase our foreign "aid" to record levels, with our debt levels being as high as they are and also at record levels, Labor's attack on big businesses (therefore likely that big business might just pack up and leave and take their jobs/employment with them them) and Labor's belief that trickle down economics don't work etc etc, I would love to hear your thoughts on why you think it's very low risk for our country.

Absolutely nothing there makes me think gold has any chance of out performing a diversified portfolio of good productive assets.

If you look at the performance of the share market over the last 100 or so years, it has performed wonderfully, it has absolutely smashed gold. But you could always find excuses not to invest, in the last hundred or so years we have had World Wars, Flu pandemics, depressions, recessions, Nuclear arms races, terrorist attacks, oil shortages, nuclear meltdowns, multiple conflicts, Ozone layer holes, heaps of stock market crashes, etc etc etc.

But through out all of that, simply buying and holding a diversified piece of the stock market has delivered returns far in excess of owning gold.

 

[Value Collector]

Hence the case for having a small portion of a portfolio in defensive and wealth preserving assets such as gold is justifiable I think.

If you owned a portfolio of stocks before the GFC, and you were living off the dividends, you would have been ok if you just ignored the "crisis" and just kept holding and banking your dividend checks, some of your dividends would have been lowered, but you would be fine, and perform far better than gold

 

[aus_trader]

If you owned a portfolio of stocks before the GFC, and you were living off the dividends, you would have been ok if you just ignored the "crisis" and just kept holding and banking your dividend checks, some of your dividends would have been lowered, but you would be fine, and perform far better than gold

Can't argue with the point you made earlier about a basket of top stocks that would outperform gold over the last 100 years.
However some individual stocks disappeared or became worthless thanks to the GFC. I have personally experienced it in my own 'portfolio of stocks' that I had pre GFC. So although the stocks that survived have recovered, the stocks that went under hit my portfolio hard. I used to be the "buy the dips" investor before GFC and kept adding to my stocks (including the ones that went under) during early stages as GFC unfolded. During the later stages I was in the exact same posture as TikoMike logo/avatar:


Since then I have become quite vary of stocks even with good valuations and yield, so not hesitant to liquidate even if there is a moderate downturn. I can always buy back if I am wrong and market turns around and heads higher.
Although I only wish to allocate a small % to gold (or other defensive asset that is almost certain to survive all crisis), that would be the only thing that I would do my pre GFC tactic on. Call it buying the dips or dollar cost averaging or catching a falling knife. So for example I may go from a 2% portfolio allocation to a 3% portfolio allocation if gold crashes and burns, which is entirely possible since the central/investment banks and other market manipulators will probably make it look worthless before any real crisis begins. So what can happen is once it becomes unbearable for any long term holder to see their gold investment losing so much value they may get rid of it due of years of frustration, ironically at the wrong time near the bottom.

 

[Grandfather11]

G'day all,

I really like everyone to get involved in this discussion, since the combined knowledge of all would be so much more powerful than one individual. So here is my dilemma...

I am thinking about getting some exposure to Gold, particularly physical gold rather than gold related investments and gold mining companies. Main reason for this is to have some exposure to an asset that may preserve wealth. The problem is storing it securely. There's also ongoing costs with secure storage !

The problem is not with purchase of an once or two along with a few coins, but rather storing it securely so that it doesn't go missing from under the mattress during a house robbery scenario

Because I see Gold as more of a hedge against currency de-valuations due to money printing etc, it's hard to justify ongoing storage costs. Also Gold is not income producing asset as owning gold does not entitle you to dividends or interest. So in a way I sometimes get negative thoughts about the whole idea of trying to own a bit of gold, especially when Warren Buffet's view on gold comes to mind. Buffet's comments were "Gold gets dug out of the ground in Africa, or some place," said Buffett in 1998. "Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it."

So is there a way to buy and hold some gold securely with minimal or no ongoing fees ? If not what other assets are there that can preserve wealth safely?

Hello
Yes the Perth Mint has the option of buying gold with no storage or transaction fees.
If you have an account with $50k or over gold or silver can be purchased within their own inventory. If you want it fabricated they will do this at a fee.
Otherwise the Perth Mint can hold you you. Buy and sell at any time. Backed by the WA government.
Hope this helps
Grandfather11

 

[luutzu]

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.

Well I haven't read it, was only half listening to Chomsky in a reply to neo-liberalism and the current trend in free-trade, competitive edge of nations.

But it sound like I heard it right that Smith's ideas was that each country ought to specialise in what they have plenty of. In the case of those British colonies back in the days, it'd be agriculture and skinning racoons... leaving the industrial production to mother England.

That would be the most efficient use of capital and resources. i.e. you use what's readily available, what your workforce is capable of. That way you're more "competitive" - being the lowest producer with readily available human and material resources etc.

If that's the case, I'd agree with Chomsky that Smith missed a few critical points there. That is, a country cannot become wealthy and remain "competitive" if it simply stick to its knitting.

To grow a country need to both do what it is currently good at as well as making investment expand its frontiers. That expansion often mean finding better ways to knock out the neighbours and take their stuff... but it could also mean the technological, industrial innovation. Building that future boom our politician keeps talking about.

There's some famous, and very thick, book by some dude in the 90s or 2000 about the competitiveness of nations. It basically follow the same logic that nations should do what they're currently good at... stick with the program.

Thing is, you can't do that if you want to advance.

 

[Value Collector]

Can't argue with the point you made earlier about a basket of top stocks that would outperform gold over the last 100 years.
However some individual stocks disappeared or became worthless thanks to the GFC. I have personally experienced it in my own 'portfolio of stocks' that I had pre GFC. .

I did say a diverse portfolio, unless you know what you are doing that would mean something like an index, If you had a holding of the all ordinary index for example that you accumulated in the years before the GFC you would have been fine holding it and just living off the dividends.

 

[Value Collector]

If that's the case, I'd agree with Chomsky that Smith missed a few critical points there. That is, a country cannot become wealthy and remain "competitive" if it simply stick to its knitting.

.

Except that is not what Adam Smith recommended, he simply said that the capital of a nation should be allowed to flow to those areas that generate the highest return on capital.

He never said America should only ever stick to farming, he simply said that at the particular point in history, given that the land was largely undeveloped, it made sense to put the capital into agriculture, because the land was almost free, and with little capital large plantations that dwalf farms in England could be made.

He had full intent that as the agricultural industry became saturated with capital, the capital would begin to flow to other industries that could begin to upgrade the raw produce into higher value items for the domestic and export trade.

it makes complete sense to put all the capital you can into sugar cane plantations, before you start a rum distillery, etc etc, the rum distillery will make sense eventually, but not till after the "free" land has been planted, and there is an excess of cheap sugar.

Trying to get into higher manufacturing while your lands lay undeveloped is silly.

 

[RIP1]

Gold is an investment but it has no income attached to it- so not preferred by me. The price of gold would benefit from a dropping Aust Dollar or hyper inflation / war etc. If you think that's likely then buy some and put it in a bank vault. If you are Indian then thieves are more likely to target your home with metal detectors looking for the wife's Jewelry. No safe is safe from magnetic drill press. Safes are good to keep family and children out only - they are also good as a delaying devise when combined with excellent Back to Base monitored alarm system. Note normal insurance policy not likely to cover more than $5 or $10k and may cover none of your Gold.

 

[aus_trader]

Gold is an investment but it has no income attached to it- so not preferred by me. The price of gold would benefit from a dropping Aust Dollar or hyper inflation / war etc. If you think that's likely then buy some and put it in a bank vault. If you are Indian then thieves are more likely to target your home with metal detectors looking for the wife's Jewelry. No safe is safe from magnetic drill press. Safes are good to keep family and children out only - they are also good as a delaying devise when combined with excellent Back to Base monitored alarm system. Note normal insurance policy not likely to cover more than $5 or $10k and may cover none of your Gold.

You've made some good points about the security issues of holding gold whether it be in coins, bars or jewelry. Just for fun I googled 'magnetic drill press', man those things are brutal, no safe is safe !!

So my thinking is heading towards not storing any physical type of gold for wealth preservation purposes due to the risk of theft. If I buy a coin or some other collectible, it'll be for it's aesthetic value only since some commemorative coins etc are very beautiful. It'll also be from money I can afford to lose e.g. few hundred dollars worth maximum. If stolen, it won't hurt too much financially.

I'm not worried about gold not producing an income, it's going to be a small % of my total assets so it can sit there. However it has to be secure form of investing before I decide to put thousands into it.

Historically though gold has played a very important role as a symbol of status, power, a civilisation's wealth etc, see BBC article of an amazing Roman gold ring that was discovered recently:

https://www.bbc.co.uk/news/uk-england-somerset-45028623

 

[Trav.]

This may be of interest to some

https://smallcaps.com.au/perth-mint-launches-low-fee-gold-etf/

 

[aus_trader]

This may be of interest to some

https://smallcaps.com.au/perth-mint-launches-low-fee-gold-etf/

View attachment 88924

Thanks for the info Trav, I've given you a "like". I'm sure everyone reading this thread will appreciate the info, it's information that helps us all make better investment decisions.

Coincidentally I have also started putting a little money into gold via an ETF. After much thought and consideration the original idea of storing gold on my own is not going ahead. I may keep a beautiful coin or some collectible gold memorabilia for it's beauty but not for wealth preservation/investing purposes, where I will be letting go of thousands of hard earned paper/plastic $$$

Gold looks to be heading down at the moment, see chart below:


So I've only bought a small quantity of ETF units, keeping money for future purchases in case it drops much further for example if it goes below US $1000 I'll surely buy more...

For ease of managing portfolios I will not be keeping a portfolio of gold assets here on this thread. I think it's appropriate to bundle it with my Medium/Longer Term Stock Portfolio of stocks and ETF's. All gold/wealth preservation discussions and new ideas shall be discussed here on this thread of course for the benefit of all.