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Comment by dougk16 | Hacker News Reader

I've been thinking about this lately, and, at the risk of sounding like a doomsday kook, this seems to make sense to me (perhaps in a milder sense) no matter where one lives. My plan is, if I ever get over $X in my account, where X is some reasonable buffer to pay bills, etc., that I'll just buy gold with the overage[1]. Back in the day you'd at least get reasonable interest by keeping money in a bank, but nowadays it's really only the convenience of direct deposit and online bill pay that draws me. Even then, all these charges and penalties and sales pitches every time I enter a bank are really turning me off.

[1] I acknowledge some logistical challenges with my plan if I become a millionaire.

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If you think gold is a predictable and low-volatility store of value you really should look at inflation adjusted gold prices from 1980-2000.

I didn't mean to imply that I would expect to make money from buying gold (if that's what you mean). Even if gold prices were expected to drop, I'd still be interested in buying it as an insurance policy. No matter how severe a crisis, once the dust settles, gold will always be worth something, for reasons I don't understand.

A few things to consider:

Central banks are buying gold. http://www.bloomberg.com/news/2013-02-10/putin-turns-black-g...

Central banks are repatriating gold reserves held overseas. http://www.forbes.com/sites/afontevecchia/2013/01/16/germany...

The LIBOR rigging scandal has turned the spotlight to the gold market, where it has long been claimed that the price of gold has been manipulated. http://www.guardian.co.uk/business/2013/mar/13/london-financ...

It has also been claimed there is a ponzi scheme in paper gold, i.e. instruments may not actually be physically backed, so when things go pear-shaped and you ask for physical delivery, you will have to fight other investors over legal ownership. http://www.businessweek.com/news/2011-12-12/hsbc-sues-mf-glo...

Given recent banking scandals, anything is possible. Caveat emptor!

Central banks are known buyers at the highs and sellers at the lows. Part of their mandate is "financial stability", and up to and including backstopping out-of-favour assets (like, say, mortgages). I see central banks buying gold as a way to stop a precipitous decline in gold as money rotates sectors.

Then again, this theory happened before this Cyrprus thing, so who knows for sure. Guess we'll see what kind of carnage happens next week.

Unless it becomes illegal to own gold bullion again, as happened in the Great Depression.

http://www.the-privateer.com/1933-gold-confiscation.html

No matter how severe a crisis, once the dust settles, gold will always be worth something, for reasons I don't understand.

The reasons is simple: gold has specific physical characteristics which many people for a very long time have regarded as suitable for use as physical money: principally, it's durable, rare but not too rare, recognizable, and easily divisible. That widespread subjective assessment is unlikely to change.

>"Back in the day you'd at least get reasonable interest by keeping money in a bank, but nowadays it's really only the convenience of direct deposit and online bill pay that draws me."

Back in what day? You mean, like, 5 years ago? We're still amidst one of the worst recessions ever and rates are at all time lows. No, you don't get riskless real returns right now. But you can also borrow at exceptionally low rates. That will change in the future.

Hording physical gold outside of diversification is a bad idea. You have storage costs, pay a premium over spot when you buy it and eat a spread when you sell it. And, as another commenter said, look at its real returns; not spectacular.

Want to know what was a good buy? The stock market, 4 years ago. When everyone was screaming about the world imploding and it was at irrationally low levels. But that's just the thing: you have to be willing to zig when others are zagging.

As I said below, it would be more of an insurance policy than an investment, but I'm still willing to believe it's a bad idea for that reason as well. I don't plan on buying enough gold that it becomes a logistical challenge to store though...basically just as a buffer if things go south. Something disturbs me, especially as a hacker, knowing that the physical manifestation of a good chunk of my life's work is just bits on a bank's computer.

This does depend on where you live. In some places, mortgages are offered with "offset accounts", where your positive balance in the account offsets your outstanding debt on the mortgage, and in doing so reduces the interest accruing on the loan. This means that your excess funds effectively earn the mortgage rate of interest (and since interest avoided isn't "income", this isn't taxed as deposit interest would be either), so it's an attractive option if you have a mortgage.

That sounds really interesting. Can you provide a link to an example or source of additional info.

Thanks

offset accounts are common in Australia http://www.news.com.au/money/banking/offset-accounts-help-lo...

Likely anywhere that variable-rate/variable-term mortgages are common (ie. partially funded by short-term securities).

Sounds similar to America's interest exemption.

" I'll just buy gold "

This only works if you physically have the gold. Having a note stating how much gold you own, which is housed someplace beyond your reach isn't security. You are still relying on the market/bank.

And even if you did have the gold, this presents a slew of other problems; security and storage are two that come to mind.

With bitcoins you don't have to worry or pay for storage like you do with gold.

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