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Holding Physical Gold Is About Security, Not Speculation

25 February 2010 5 Comments

I’ve looked into buying physical gold and silver recently, and have come to two realizations:

  1. Finding physical gold and silver is not easy, which shows the demand is high – take that for what it’s worth
  2. Owning physical gold is about security, not speculating or trading

I’m not going to comment on the first realization even though I think it is an important thing to take notice of.  Today, I’m going to focus on why owning gold and silver is for security.

First off, gold and silver prices are very volatile.  Trying to speculate where the prices are going is a waste of time.  Additionally, speculating about inflation vs. deflation is also a waste of time, because we could have both or one or the other, the result doesn’t concern me.  What does concern me is that I am more secure by having some holdings of physical gold and silver.

Now, when I say own physical gold and silver, I’m referring to the physical stuff that you can hold.  And I’m talking about having it in your house, hidden, accessible to only you.  Safety deposit boxes don’t count.  This is the security I’m aiming for.

Think about owning physical gold and silver as just a way to enhance your diversification.  If the dollar continues to weaken, which has been the trend, we will be not hurt as badly if we own gold and silver.  The reality is that gold and silver will have value today, and hundreds of years from now.  I can’t say the same about the U.S. dollar.

My advice is to buy some physical gold and silver, you determine how much, but to definitely buy some and then hang on to it.  If prices become more attractive, maybe pick up a little more.  Again, just hang on to it.  It’s security.  It’s insurance. Do not stress over the daily spot price of these metals.  Just relax knowing you have a little more security than you did before.

5 Comments »

  • 20smoney said:

    Well first, you're speaking of an "end of the world" scenario. Even in this scenario, I believe a gold coin (or silver coin) will be much more attractive than a greenback, no?

    But, again thats the end of the world scenario, the security that I speak more of is the security against a completely unsustainable economy and entitlement society that we currently have going. The competitive currency devaluation around the world to "boost" growth is killing our purchasing power.

    Lastly, like i said, gold isn't the end-all solution, its just a part of the overall picture. Thx.

  • Amateur Financier said:

    I'm with Evan; it's hard to picture a situation where having physical gold on hand seems necessary. If the world (or at least, the country where I'm currently living) goes to heck in a hand-basket, I have my doubt that too many people will be taking gold in exchange for guns, food, potable water, or any of the other necessities of life. (At least, not after the first few groups to start trading find themselves with baskets of pretty yellow rocks while everyone around them now has their needed survival equipment.

    If it's not an end of the world thing, though, I'm a bit unclear about the need to purchase gold (silver), particularly to purchase it in an actual, physical form that you keep in your house. It could get stolen (or lost, if your house is as disorganized as mine), requires high transaction costs to buy and sell, and is subject to the whims of investors (although, I'll admit the same can be said about every investment, to some extent). If it's an issue of diversification, I'm not sure why gold ETFs or something similar wouldn't be a good option.

    Now, if the argument is that the US economy is in a precarious position and we might we a massive slump (if not outright collapse) in the dollar, then I'm with you on the need to diversify away from dollar denominated holdings. Although, wouldn't it be better to keep alternative currencies (Euros, pounds, yen, Canadian dollars, whatever you prefer), which can more easily be exchanged into dollars? (Unless the argument is that all major currencies could be brought down in an ensuing financial collapse, in which case we're back onto the Apocalyptic scenario anyway.) Just trying to get the reasoning behind a suggestion I keep seeing but which is usually not really explained.

  • William said:

    If the markets collapse and you have a chest of gold in your floorboards, you will still starve. Gold means no more than owning government bonds. An to think that an oz of gold is "worth" $1200 is bizarre. It is simply speculation about the fears of conspiricists.

  • 20smoney said:

    How about if you have gold as well as food storage?

    What is a dollar worth?

  • Roy said:

    Physical possession is where it is at folks.
    After world W II there was boatloads of money (currency) which you could not buy anything with. A wheel Barroe ful of money couldnt buy anything "BUT" Silver & Gold jewelery could be traded for anything the heart desired, including food, petrol, services. No one wanted currency, hard metal was where its at.