Friday, February 13, 2009
Investors Flocking to Gold
This CNBC story explains that because of the stimulus hijinx and other skullduggery, fund managers are acquiring larger exposure to gold, often through ETFs such as GLD. The Exchange Traded Fund allows an investor to buy a stock (e.g. x shares of GLD) rather than buying physical gold bars and storing them somewhere. The people running GLD, in turn, go out and buy more bullion when more people pile into their ETF.
However, unless there are tax considerations--like if you are trying to shuffle around your 401k and need to buy shares of stuff to avoid withdrawal penalties--I don't think you should put your money into a gold ETF. If the really horrendous inflation comes that I think is a real possibility, it would be perfectly consistent for the U.S. government to void all ETF shares and issue some paltry payment in dollar bills to the investors. They would give some bogus justification like "preventing a run on the dollar" or "battling the instability of hoarding."
If you are concerned about massive price inflation and want to hedge yourself with gold and silver, I strongly recommend that you personally acquire the physical metals. And if you're really paranoid, don't put them in a bank.
However, unless there are tax considerations--like if you are trying to shuffle around your 401k and need to buy shares of stuff to avoid withdrawal penalties--I don't think you should put your money into a gold ETF. If the really horrendous inflation comes that I think is a real possibility, it would be perfectly consistent for the U.S. government to void all ETF shares and issue some paltry payment in dollar bills to the investors. They would give some bogus justification like "preventing a run on the dollar" or "battling the instability of hoarding."
If you are concerned about massive price inflation and want to hedge yourself with gold and silver, I strongly recommend that you personally acquire the physical metals. And if you're really paranoid, don't put them in a bank.
Comments:
For those who do not have the means to acquire gold, I guess we'll need to become familiar with the barter system. Is there any history on what people did in other countries when the currency tanked and inflaction was rampant?
# posted by 
: February 13, 2009 at 4:21 PM
: February 13, 2009 at 4:21 PM
Your post about FDR's confiscation of gold took my breath away. After five years of economic education I never even realized how far the fascistic control of the country went under FDR.
Can't wait for the book.
Can't wait for the book.
2nd anon,
You don't need to get huge bars of gold. Just go to a local coin shop and ask if they have "junk silver," i.e. U.S. coins from before 1965 that have actual silver in them.
I don't know what markup they will charge you, but I got mine very cheap; they practically sold it to me at the market price of the metal.
You don't need to get huge bars of gold. Just go to a local coin shop and ask if they have "junk silver," i.e. U.S. coins from before 1965 that have actual silver in them.
I don't know what markup they will charge you, but I got mine very cheap; they practically sold it to me at the market price of the metal.
I don't remember where I read it, but someone once wrote a reply to me that said the IRS has a legal right to be present at the opening of safety deposit boxes.
I don't know if this is actually true since I have never had such a box, but it wouldn't surprise me.
I don't know if this is actually true since I have never had such a box, but it wouldn't surprise me.
# posted by : February 13, 2009 at 11:12 PM
: February 13, 2009 at 11:12 PM
I haven't done much research on the Perth Mint. If you had a ton of wealth and wanted to park it somewhere that the US government couldn't confiscate it and that would survive a worldwide hyperinflation, that might be a good spot.
But in terms of surviving in the United States through a hyperinflation, I think the first thing you want is a bunch of precious metal on hand so you can buy things easily when prices start skyrocketing and the government clamps down on foreign transactions etc.
But in terms of surviving in the United States through a hyperinflation, I think the first thing you want is a bunch of precious metal on hand so you can buy things easily when prices start skyrocketing and the government clamps down on foreign transactions etc.
Bob,
What is your opinion about buying gold bullion from online vendors, who store your gold bars in a warehouse somewhere and which you don't hold yourself, vs. going to some coin shop and getting some old American Eagle or Buffalo gold coins (or whatever they are)? Are those online purchase-and-storage deals only for high-rollers, not someone who wants to buy an ounce or two of gold and can't afford any more? When FRN's are worthless, will it really matter if you have a bar of gold or a souvenir coin with some design on it, as long as you have a certain mass of gold? Thanks.
What is your opinion about buying gold bullion from online vendors, who store your gold bars in a warehouse somewhere and which you don't hold yourself, vs. going to some coin shop and getting some old American Eagle or Buffalo gold coins (or whatever they are)? Are those online purchase-and-storage deals only for high-rollers, not someone who wants to buy an ounce or two of gold and can't afford any more? When FRN's are worthless, will it really matter if you have a bar of gold or a souvenir coin with some design on it, as long as you have a certain mass of gold? Thanks.
# posted by : February 14, 2009 at 2:04 PM
: February 14, 2009 at 2:04 PM
John,
Sorry but I don't know from firsthand experience, so I really shouldn't comment on how reliable those online vendors are.
But look, if the government voids gold contracts again, those people would be like online drug dealers who have already been paid. Are they really going to contact all their customers (whom they don't even know) and say, "Yeah how do you want to take delivery of this illegal contraband?"
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Sorry but I don't know from firsthand experience, so I really shouldn't comment on how reliable those online vendors are.
But look, if the government voids gold contracts again, those people would be like online drug dealers who have already been paid. Are they really going to contact all their customers (whom they don't even know) and say, "Yeah how do you want to take delivery of this illegal contraband?"
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