Skeptical about gold

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AtlasShrugging

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I wanted to get you guys' opinion on this - it's kind of taken as a given that gold is a good thing to have in a SHTF situation, when currency is worthless. But I'm skeptical about this for a couple reasons:

1) We think that gold has some intrinsic value, unlike currency. But if you think about it, gold is a rock that you dig out of the ground. It has value for the same reason that paper money has value - because we all agree it does. What's the intrinsic value of beads or shells or salt, which have all been used as currency in the past?

2) Say everyone stocks up on gold so they'll have something that's worth something when they need it. While that's happening, demand is high so the price keeps going up. You feel good because your stockpile is worth a lot. Suddenly one day the money's worth nothing, and everyone gets out their gold to trade with. Now you have a market flooded with gold, everyone wanting to sell/trade it, nobody wanting to buy it anymore. Econ 101, supply and demand, the value plumments. Not to mention that you're now in a situation where it's no longer a matter of taking a day trip to Circuit City and Best Buy to compare prices. You may have no choice but to pay whatever is asked if you want to survive. All of this tends to create a seller's market, and you might be shocked at how little you can get for your gold.

What do you think?
 
Gold is used in many industrial processes, so it does have a use. Offhand, I can't think of too many of the uses... contacts between things that connect together (cables, computer parts) come to mind. I think silver is more useful than gold in industrial processes though.

I'm not counting on any gold to be able to let me trade with sheeple after the SHTF... if no one has any food and is starving, then all the gold in the world won't cause someone to give up what little food they may have in exchange for it.

I view it as a hedge against inflation (especially hyperinflation... which is bound to happen the way they keep throwing around trillions of dollars now), and also as a store of wealth through the SHTF for use by the survivors after it is all over and time to rebuild. (Assuming I survive of course.... despite all the prepping I do, I do realize that me surviving a total SHTF situation of biblical proportions is fairly low odds.)

All that said, this is all theoretical as I don't have any of my own, just a few 100 year old Morgan silver dollars (worth about $20 each).
 
Gold has intrinsic value, unlike "fiat" currencies ("this is worth a dollar because I say it is!"). Also, gold is coming out of a decade bear market where there was no money in mining, so the demand will shortly outstrip supply.

Gold is a decent hedge. It might go down to $500/oz, but it'll never be $0. Also, with Uncle printing money as fast as possible, gold could go to $5000+/oz.

Silver is also a good hedge and will be the likely "money" should the dollar collapse.
 
There are always arguments about in SHTF situation gold wouldn't be of any use. But there are many scenarios that're below the scale of a nuclear holocaust or TEOTWAWKI. Most civilization in recorded history used gold as a medium of value-exchange because bartering just doesn't cut it at times (think how difficult it is to make a 3-way baseball trade with no $ involved).

I don't see the need to horde gold/silver. But having some on hand against hyper inflation, or enough to get transportation out of a troubled country is sound policy.

I once worked at a Chinese restaurant owned by South Vietnamese refugees. They were fairly rich before VC took over. They were able to buy boats, weapons and the right of passage to get out of the country after the fall of Saigon, and gold was the only acceptable form of payments.

In the province where I grew up at, in late 1800's the farmers got rich by growing opium so everyone stopped growing food stocks. All of sudden famine hit and many families died with buckets of silver in their homes.

So the lesson is: do everything in moderation (I keep telling myself that about this new collection hobby).
 
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Prepper, agreed - gold will stay useful and valuable as long as the economy is humming along more or less smoothly..

andrew said:
Gold has intrinsic value.
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Well, that's what I'm challenging. What's intrinsic about its value, apart from a consensus among a lot of people that we value it?

andrew, chaynes68, you both seem to be talking about the value of gold in a functioning national/international economy. When that's gone, and the economy consists of you with a pile of gold and your neighbor with a pile of food, water, wood, clothes, ammunition, or whatever else you need - Morningstar charts and graphs become completely irrelevant. No?

DontForgetJune4th said:
But there are many scenarios that's below the scale of a nuclear holocaust or TEOTWAWKI.

I worked at a Chinese restaurant once owned by South Vietnamese refugees. They were fairly rich before VC took over. They were able to buy boats, weapons and the right of passage to get out of the country after the fall of Saigon, and gold was the only acceptable form of payments.
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True, I'm thinking about the worst case scenario. As far as the refugees, I also think about people who escaped from WWII Germany with gold - but they were still operating in a larger functional economy.

(Is TEOTWAWKI on the acronyms page? I hope so. [shocked] Usually I can figure these out, but man ..!)
 
I'm curious, how did the Vietnamese buy their way out of the country with gold? I'm trying to picture how I would pull this off if, for example, I had to leave America forever and go to... oh I don't know.... New Zealand (just picking some place that can't be driven to). I imagine the airlines would not accept payment in gold. And, I'd never be able to buy a boat capable of making it across the Pacific.
 
WeedWhacker said:
The End of the World as We Know It.
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Thanks!

Prepper said:
I'm curious, how did the Vietnamese buy their way out of the country with gold? ...
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You're talking about a 3rd world country where survival is a fact of daily life, that's largely based on personal associations and barter anyway - there was war, and society had been breaking down for awhile - there were a lot of people trying to escape any way they could, and probably a lot of fisherman and others with boats who saw an opportunity to make a lot more money .. it can be hard for us to imagine how 95% of the world lives .. and that's the problem with trying to imagine how we'd survive in a world like that. The hard fact is, most of us probably wouldn't - including me.

I bet in a SHTF situation, the Delta ticket agent will find a way to get you on a plane if he needs your gold. Or else he has a brother in law with a private plane. Of course, when you get there, there's no plane, but that's life. [grin]
 
The chef of that restaurant told me that he had a family bakery, small business, good life etc. VC took their business over but they had gold hidden and saved. They bought their boat but the VC navy was blockading all exit points. They could always bribe though... The price was one gold bar (about thumb-size) per head to get out. These guys had it tough, they sailed on make-shift boat to Hong Kong, and eventually migrated to the States.

Yes, bribing still relies on some form of functional economy. But fall of a country should be pretty bad as it gets. I view TEOTWAWKI preparedness as just man/boy fantasy if not outright paranoia.

Edit: They also bought grenades (not sure about rifles)! They encountered pirates at sea and they stood fast and threatened the pirates to blow up everyone (including themselves) in several occasions.
 
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Gold and silver have had 'value' since the days of the Romans.

An ounce of gold back then would have bought you a nice toga, and shoes. An ounce of gold today will buy you a nice suit and a pair of shoes.

It is a hedge against inflation and will in the long term maintain value across fiat currencies. It may not have value zer0 dayz to one year after TEOTWAWKI, but it will most likely have value.

Better place to store value is in land (lots and lots), food, ammo, firearms....

I'm not an economist, I don't play one on TV, nor did I stay at a Holiday Inn Express last night. This is just MHO.
 
doobie said:
An ounce of gold back then would have bought you a nice toga, and shoes. An ounce of gold today will buy you a nice suit and a pair of shoes.
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OK, that's reassuring.

doobie said:
It may not have value zer0 dayz to one year after TEOTWAWKI..
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On the other hand, isn't that the most important time? I think most people who buy gold for TEOTWAWKI do it thinking they'll have something to buy stuff with the day after the banks collapse and the dollar is worth nothing, so they won't die of starvation.
 
My goal has tended to keep about 25% of my cash net worth in gold/silver. At this moment I have 42/45/11 value in silver/gold/platinum.

Silver I usually do 1 oz. bars or coins (American Eagles)
Gold I usually to 5 or 10gr bars. I try for the lowest over melt. A full oz coin/bar of gold to me, is way too much value to keep in one place.
 
AtlasShrugging said:
1) We think that gold has some intrinsic value, unlike currency. But if you think about it, gold is a rock that you dig out of the ground. It has value for the same reason that paper money has value - because we all agree it does. What's the intrinsic value of beads or shells or salt, which have all been used as currency in the past?
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Not true at all. Gold may be a rock that you dig out of the ground, but only in a few certain places, and it takes a lot of work (and expense) to do so.

Gold is useful and fairly unique in its usefulness. It's rather inert, doesn't rust or tarnish, is a good conductor of electricity and heat, is extremely malleable and ductile, it has useful optical properties including both transparency and reflectivity. It's also aesthetically pleasing to many people.

The fact that gold is relatively rare, expensive to produce, and has both practical and aesthetic uses means it will always have an intrinsic value, not just an agreed upon value.
 
AtlasShrugging said:
OK, that's reassuring.
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Yeah it maintains value in the long term, but has it's spikes (up and down) in the short term like any investment does.

AtlasShrugging said:
On the other hand, isn't that the most important time? I think most people who buy gold for TEOTWAWKI do it thinking they'll have something to buy stuff with the day after the banks collapse and the dollar is worth nothing, so they won't die of starvation.
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Depends on your current status. A year or two of food supply and/or ability to grow, raise, hunt to supplement stockpiled food is my plan. Water is my iffy point, but in the next 6 months I hope to remedy that. As long as I'm single I'm set. If I happen to stop being single it becomes 6 months or I have to go buy a bunch more food, which I plan to do over the next 6-12 months anyway.
 
Couple points:

Some gold coins are legal tender so their value can never hit zero. The Canadian maple leaf has a value of $50CDN.

Personally I think not all SHTF scenarios are equal. A nuclear war for example would mean your gold will have little value in the short term. An economic collapse in the very short term gold would have little value. Once a new currency system is established, it will be fully convertible probably with a nice rise in value.

Personally, I see gold as an excellent hedge against inflation. Should the fed be successful in turning the economy around (doubtful), there is no way they will be able to react quickly enough to squash inflation. Many see gold hitting $1500-2000/oz as this crisis unfolds. With any luck we will see some tax reform...like a consumption tax (http://www.fairtax.org) and you won't have to pay taxes on any gold you cash in.

Paying off your mortgage with inflated money...priceless!
 
dsm said:
Gold is useful and fairly unique in its usefulness. It's rather inert, doesn't rust or tarnish, is a good conductor of electricity and heat, is extremely malleable and ductile, it has useful optical properties including both transparency and reflectivity. It's also aesthetically pleasing to many people.

The fact that gold is relatively rare, expensive to produce, and has both practical and aesthetic uses means it will always have an intrinsic value, not just an agreed upon value.
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Agreed on gold's uniqueness, rarity, and usefulness. But you're still talking about its value in our present economy and industry. I will never argue with that. I'm indulging in a thought experiment in which those things are gone. Gold's physical, chemical, electrical, optical, and aesthetic properties won't mean much to starving, freezing, dirty people who don't know where their next meal is coming from (isn't that what the topic of survivalism is all about?)

[tongue in cheek = ON (sort of)] Camel dung is rare. Glass windows are aesthetic. Aluminum doesn't rust. Water is a good conductor of electricty. Who cares, when you're starving?

I'm going to needle some of you guys a little bit here - I'm seeing an inability to imagine this scenario, because it's too remote from our experience, and too horrible to think about.
 
doobie said:
Gold and silver have had 'value' since the days of the Romans.
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Yes. On the other hand, Roman soldiers were paid in salt, which was the most valuable commodity at the time. Ever wonder where the word "salary" comes from? Or the phrase "he's not worth his salt" ? Take a look at your pepper shaker. That's a substance that used to be affordable only to kings. Maybe I'm getting a bit abstract here, but I'm just saying that NOTHING HAS ANY VALUE unless enough people agree that it does. And when people stop agreeing that it does, it doesn't anymore. It could take 1,000 years, 100 years, or one day for that agreement to dissolve.

chaynes68 said:
Some gold coins are legal tender so their value can never hit zero.
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Yes. But "legal tender" assumes that there are laws.
 
AtlasShrugging said:
Yes. On the other hand, Roman soldiers were paid in salt, which was the most valuable commodity at the time. Ever wonder where the word "salary" comes from? Or the phrase "he's not worth his salt" ? Take a look at your pepper shaker. That's a substance that used to be affordable only to kings. Maybe I'm getting a bit abstract here, but I'm just saying that NOTHING HAS ANY VALUE unless enough people agree that it does. And when people stop agreeing that it does, it doesn't anymore. It could take 1,000 years, 100 years, or one day for that agreement to dissolve.
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I think you hit the nail on the head.... Value is what you believe it to be. Perhaps in 1000 years leaves will be worth ten pounds of gold. Perhaps a drop of water will be worth slaving away for 8 hours a day in the blazing sun. Who knows what will have value tomorrow, one can only look to the past and hedge their bets.

EDIT: I would prefer to be paid and spend/pay bills in gold/silver. My personal belief is that little green pieces of paper have no value. Luckily others don't so I as long as I spend them fast enough I can obtain the goods I want before inflation takes away my value.
 
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doobie said:
Value is what you believe it to be.
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I would only amend that to (going back to Econ 101) "value is what other people are willing to pay for what you are offering."

I believe that the bag of cat hair I've been collecting is worth $500. I accept Visa, Mastercard, and Paypal.
 
AtlasShrugging said:
Agreed on gold's uniqueness, rarity, and usefulness. But you're still talking about its value in our present economy and industry. I will never argue with that. I'm indulging in a thought experiment in which those things are gone. Gold's physical, chemical, electrical, optical, and aesthetic properties won't mean much to starving, freezing, dirty people who don't know where their next meal is coming from (isn't that what the topic of survivalism is all about?)

[tongue in cheek = ON (sort of)] Camel dung is rare. Glass windows are aesthetic. Aluminum doesn't rust. Water is a good conductor of electricty. Who cares, when you're starving?

I'm going to needle some of you guys a little bit here - I'm seeing an inability to imagine this scenario, because it's too remote from our experience, and too horrible to think about.
Click to expand...

When you are starving - the thing you want is a gun, so you can take what you need from other people or kill yourself a squirrel - or a deer, so you can eat.

When you have at least a semi functioning economy - what you want is a form of money that people recognize as having intrinsic value and allows you to retain your wealth. While you are right in saying that everything only has the value we assign to it - only gold and/or some of the other precious metals are resistant enough to manipulation to have been a consistent store of value across the millenia and across many different civilizations.

Paper money? Over and over again we have seen governments inflate and destroy it's value. Camel Dung? Sure it's rare here - but if it became valuable enough some guy would sail to Saudi Arabia with a supertanker and collect all the camel shit he could find and sail back - and destroy the value of all your camel shit savings by flooding the market. Salt? Gandhi destroyed this one when he marched to the ocean and boiled a pot of sea water (go look it up).

The point is that in order to have some sort of non inflatable monetary system you need SOMETHING that is AS RESISTANT AS POSSIBLE - to manipulation.

So far gold had served that purpose far more successfully than anything else that has been tried.
 
AtlasShrugging said:
I would only amend that to (going back to Econ 101) "value is what other people are willing to pay for what you are offering."

I believe that the bag of cat hair I've been collecting is worth $500. I accept Visa, Mastercard, and Paypal.
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Value is when you can have an equitable trade that neither parties are disappointed with.

A while ago I worked on trying to spin cat hair into thread... I never had much success...unfortunately.
 
doobie said:
Value is when you can have an equitable trade that neither parties are disappointed with.

A while ago I worked on trying to spin cat hair into thread... I never had much success...unfortunately.
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Or - someone once said that a successful negotiation is one where both parties walk away unsatisfied ... or something like that.

On the cat hair - you're a better man than me. I've seriously (no, seriously) thought that if I'd saved all the hair my cat has shed or I've brushed off him, I could have made a few sweaters by now. Thanks for wasting your time so I don't have to. [rofl] Now that's the spirit of survivalism.
 
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The value of precious metals in a survival scenario seems dependent on time-line. Metals would likely have their greatest "value" in the beginning of an emergency when there is a lack of confidence in established currency(ies) but some belief in eventual order restoration. In other words metals might be converted back into stable monies sometime down the road. If things deteriorated completely however it would only be those in a secure long-term situation who could 'afford' to keep it and can tie-up value there. In other words, value not needed for more pressing survival uses. In the interim it would be basics that have the greatest utility to most, like a box of .22 LR as an example.
 
Another interesting point about Gold is the physical possession factor. Currency must be held in some sort of government supervised manner unless you want to lose the investment value (interest, earnings, etc.). Gold may be physically possessed and appreciates (or depreciates) at the same rate as if it were held in a government supervised account. Normally, government supervision is a good thing - the funds are safer than the best home vault, govt guaranteed (in some cases) and you can buy and sell without worrying about valuables lost in transit, the integrity of the receiving agent to properly acknowledge what you sent, etc.

The downside occurs if the government starts to apply means testing to certain benefits currently afforded to all (for example, denying or limiting social security to people with substantial 401K accounts), or if there is a legal proceeding where there is a gap in your insurance and substantial documented assets make you a litigation target.

Another downside, even though unlikely, is physically possessed assets retain their value in times of crisis (for example, if the govt limits bank withdrawals during a financial meltdown - a step never seen in the US, but which has occurred in other countries).

Keeping undeclared to the court gold when filing for bankruptcy is a criminal offense (bankruptcy fraud), so that is not a downside unless you are prepared to violate the law.
 
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So, if one did want to hedge his bets and convert some green pieces of paper into gold, where to buy? All I know are the hucksters on TV!
 

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