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Comment by klochner | Hacker News Reader

He omits the only valid reason any non-speculator would own gold - it holds it's value through times of political turmoil - holds it's value over millenia rather than decades or centuries.

A coup d'etat may result in seizure of private companies, rendering your stock worthless, but not touching the value of gold.

It would be speculating to put all your assets into gold, but a small amount is like an insurance policy.

relevant: http://www.csmonitor.com/World/Americas/2011/1105/Hugo-Chave...

    Government expropriation of private industry has been a
    key policy of Chávez's regime.

    More than 450 companies have been expropriated this year 
    alone. ExxonMobil, which had its assets seized in 2007, is 
    still fighting the Venezuelan government for $7 billion in 
    compensation it believes it is owed.

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An unstable government could just as easily seize your gold.

What investor cares about millennia? Centuries is already too much, unless you're vastly more concerned about your great great great grandchildren than most people. 100 years is probably the absolute largest possible upper limit for a real investor to care about, and typically it's much less still.

I think he was talking about a small amount of gold. Twenty-thousand dollars worth could fit in your hand and easily be smuggled in clothes, luggage, etc. That's pretty handy if you had the flee the country from nazis(or whatever) that have stolen all of your other assets.

Admittedly that's a pretty unlikely scenario.

It's even more unlikely because you then have to find a buyer that's willing to pay market price for the gold wherever you end up at. You'll be reduced to selling it for whatever people are willing to pay.

Gold is pretty easy to sell and even if you got a terrible price for it, you are still better off than without it.

In the past it's been mainly useful if you can flee from a region in turmoil to one with more stable conditions. For example, my grandfather fled Turkey for Greece in the late 1910s (http://en.wikipedia.org/wiki/Greek_genocide), taking some gold with him that he was then able to sell in Greece, using the money to help resettle.

Many wealthy people in vietnam were reduced to nothing when the currency became useless. The few smart people who had gold were able to move their wealth out. The entire world is going to go to shambles at once, that is a very low probability event compared to a region. Even during WW2 there were regions that were relatively untouched by the world war.

If we've come to the point where you're fleeing the country from Nazis with only what you can carry in your hand, the only thing that's going to be sustainable is investment in _yourself_ through massive education. That way you're up and working and earning from the moment you're safely away.

Since we are talking Sci-Fi scenarios...

It makes a lot of sense to try and carry as much value with you as possible. Conditions during the course of your escape are likely to be difficult and the ability to pay for thing (=bribe your way out of trouble) is likely to be much more useful than knowledge of advanced mathematics or Python minutea.

(Of course, the most useful way to carry value in an escape scenario is gemstones, not gold, since it is much easier to hide during transport).

Gemstones are not a good value store at all, since there is no liquid market for them and the first-sale price is artificially inflated through marketing.

Buy a diamond today and sell it tomorrow, and you'll make a loss of 30% or more.

In the "government collapse and you need to run from nazis" scenario, if you somehow manage to only lose 30% of your value you are doing well.

I'd note that Wikipedia says:

A high quality diamond weighing as little as 2 or 3 grams could be worth as much as 100 kilos of gold. This extremely condensed value and portability does bestow diamonds as a form of emergency funding. People and populations displaced by war or extreme upheaval have utilised this portable asset successfully.[1]

[1] http://en.wikipedia.org/wiki/Diamonds_as_an_investment (yes, it says citation needed, but nevertheless it did work in WW2.)

The changes that accrue over millenia all happen in some 100 year stretch.

My point is that looking at the last 100 years, by definition, will overlook times of revolution and change that certainly have happened and will likely continue to happen.

The government doesn't even need to be unstable: https://en.wikipedia.org/wiki/Executive_Order_6102

(Granted, many people simply shipped their gold to another country, but still...)

If this is an argument for gold, then it's important to note that most gold "owners" don't actually own gold. They own paper. Or, at best, they own shares in funds that must buy and sell their gold on fixed timetables (debatably erasing a lot of the real gains that would be made by holding actual metal). But they're pretty far removed from the physical good -- and, if the shit truly hit the fan, they'd be just as SOL as would stock-holders.

Hedging against the apocalypse is a silly reason to own "gold." Hedging against market volatility is a slightly better reason. It is important that we don't conflate the two strategies, as popular perception seems to.

I'm in complete agreement that holding something like GLD is only valuable as a hedge against market volatility.

As for owning gold rather than "gold", I find appeal in being able to put $30k in my pocket in the event that credit cards or ATMs are temporarily out of service, which could happen well short of an "apocalypse."

> Hedging against the apocalypse is a silly reason to own "gold."

In the last 100 years alone there were at least 2 such "apocalyptic" events: the Russian revolution and the communists' grab of power in China. Granted, there were a couple of lucky stock-owners that didn't see their holdings going to zero (http://en.wikipedia.org/wiki/American_International_Group#Hi...), but generally speaking it would have been much better for a "White" Russian to be carrying gold or jewelry on his way to Paris in the 1920s than to carry worthless Tsarist stocks.

But my point is that most people don't actually own physical gold (hence my use of the air quotes around the word).

In any serious failure of government, the value of bullets far outweighs the value of gold.

When the revolution comes, I'm going to hide somewhere and wait for everyone to run out of bullets.

value(canned food) > value(bullets) > value(gold)

Gold is an universal store of wealth. Canned food and bullets not so much.

It's a different kind of value.

How do you define wealth?

Gold is a universal make-believe store of wealth: it is precious because "we" (i.e. most people) agree to consider it as precious. The fact that it's rare, cannot be manufactured and doesn't corrode over time are nice to have properties but are neither necessary nor sufficient conditions of value.

The context of this subthread is SHTF situations, where all that matters is inherent value determined by the laws of nature. What good is your gold if nobody wants to take it for even a tuna sandwich or if you have a loaded gun pointed at you?

I'm taking an assault rifle to my hidey-hole just in case someone finds me before running out of bullets.

What about golden bullets, gold is heavier than lead after all.

Paranoia is not an investment strategy.

There are a whole lot of things that have to go seriously wrong before we revert back to a gold-based currency. Even if we did, all the gold in the world won't help with the food shortages resulting from the collapse of companies like Monsanto.

Most of the grain we use has to be chemically activated to grow. If the country falls apart to the point where those chemicals are not available, there is no amount of gold that will buy a loaf of bread.

The problem with gold in times of turmoil basically boils down to you saying "here's (insert weight) of gold that I'll use to pay for this", and the person you're dealing with saying "yeah, and I'm the Queen of England".

Without some sort of neutral respected authority to assay and say "yup, it's gold", you just have shiny pebbles and/or dust. And when everything around you has collapsed, reliable access to a trusted assayer may not be so... reliable.

It is easy for anyone to prove gold is real with an acid test. And you don't go to the grocery store with $20K of gold be it coins or chips. At most you would be carrying around gold rings which are small, something everyone has handled and knows and have a "smallish" value.

No, gold isn't for times or turmoil, it's for when things quiet down again--seed stock for rebuilding your life once stability returns.

And then the guy who stocked up on ammunition instead of gold points a gun at you and says "thanks for the gold", then leaves.

... unless some breakthrough in nuclear physics leads to cheap synthesis of precious metals: http://en.wikipedia.org/wiki/Synthesis_of_precious_metals

Gold would make a lovely material to construct a toilet.

You had better hope your gold is hidden in a safe place under these circumstances. What percentage of the current gold investors are hoarding trading-size chunks in the cellar and the woods?

The benefits of diversification -- higher return and lower risk -- is a better reason to invest in gold, even if it was true that gold holds its value for millenia, which probably isn't true.

The article is about "why stocks beat gold and bonds" not "why you should own only stocks and never own any gold or bonds".

Unfortunately it is worth noting that FDR instigated the greatest private wealth seizure in the history of the planet when he stole all of America's privately held gold with force.

If you've got a government that is willing to plunder like that, there's no great way to keep your wealth safe except to get yourself and your wealth out of the country.

> stole all of America's privately held gold

Except for the bit where he, y'know, paid for it at the then-prevailing rate. (Which was defined by law, since at that point the US dollar was still on the gold standard.)

If someone raped you and then paid you the then-prevailing rate for a whore, does that make it not rape?

What makes an exchange stealing is the involuntary aspect.

"If someone raped you ... does that make it not rape"

Stunning circular logic there.

"Someone" =/= "democratically elected government with clearly enumerated power".

We agreed on the Constitution and it says the government can take stuff as long as it pays you. Those are rules we agreed to.

If we all agreed on a Constitution that said the President could have relations with whoever he wanted and then people chose to stay in this country and then the President chose to have relations with them we might question whether that still qualifies as rape.

Yes, and then immediately after taking the gold he changed the standard, so if you wanted to buy your original gold back you would have to pay more money. What happened was robbery.

The only things buying gold from the US government were foreign national banks. The government never offered to sell gold to individuals after the gold clause abrogation.

Except they paid market rate knowing full well what would happen to the buying power of dollars relative to gold. I like how people are willing to redefine theft to support their notions of benevolent government. You guys are a riot.

.... only to devalue the dollar by 50% or so as soon as it was believed there was not a lot of gold left in private hands.

While "stealing the gold" is not technically correct, eliminating 50% of the value of everyone's saving IS, and the confiscation of gold was done to eliminate the best (and popular) store of value.

Of course, it was all legal -- but when the government makes the laws, that statement is completely moot.

To be more precise, FDR increased the price at which the government would buy gold from foreign buyers. The devaluation occurs in terms of foreign currency exchange. I don't think it's quite correct to put a 1:1 correspondence to that and "eliminating 50% of the value of everyone's savings". Maybe eliminated 50% the value of everyone's savings in Francs. Domestic purchasing power would be negatively affected for foreign goods, in theory it would create income in terms of increased exports.

"he confiscation of gold was done to eliminate the best (and popular) store of value."

'Best' no, 'popular' yes and that was crippling the economy.

It was 'crippling the economy' in the same sense that Bill Gates and Warren Buffets money not being spent is "crippling the economy". And it what FDR has done to savers is just as fair as "liberating" said money from BillG and WarrenB's bank accounts would be.

"It was 'crippling the economy' in the same sense that Bill Gates and Warren Buffets money not being spent is "crippling the economy". "

Umm no. What happened was people took their money out of the bank to hoard gold which crippled the money supply and credit markets. Which is exactly what would happen if Gates et al. decided to hold their money under the mattress instead of in the bank.

Aren't Bill Gates and Warren Buffett currently trying to spend as much of their money as possible on charity work, as well as lobbying to get the amount of taxes they have to pay increased?

That's an inaccurate analogy (or rather it make the point opposite to what I think you are trying to say).

Gate's and Buffet's "money" is stored in stock in companies, which add value to the economy - ie, their money is active and productive. That's the opposite to storing value in gold.

He paid for it at the then-prevailing rate so that you'd be stuck holding dollars, which he would then immediately depreciate through inflationary measures.

Not that I'm a gold-bug, but, it was pretty rude.

And given that such a thing can happen even in the US, which all things considered is very free and democratic compared to most of the world, what does that say about a strategy based on the allegedly intrinsic value of gold?

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