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Comment by secondcoming | Hacker News Reader

I'm no gold bug, but turn some of your cash into gold.

It is actually very hard to get real gold (especially in a form that you can convert back to cash in the future). Just try to get delivery of a gold bullion. And if you succeed, try selling it into the system again, without losing 30%.

Paper gold is a bet no different than a stock; it is a bet that the system and your counterparty will both be solvent when you need them.

And that seems to imply that it is a valid alternative, maybe not for large hedge funds but individual investors.

(Assuming you refer to paper gold) It’s a viable investment, just as stocks are. But not a financial-system-crash proof store of value, which is what the GGP meant, I think, when he recommended getting gold.

I own physical gold, not a lot. Here are some reasons I bought it:

a) It's a store of wealth. I don't expect to be able to go buy groceries with it, however I do expect to be able to cash it in for fiat post-depression if I need to.

b) I can move it abroad easily enough if I need to. I have immediate access to it.

c) It's cool.

It has also doubled in value since I bought it.

I am old enough to remeber the chaos in the silver market a few years ago, where it went to $50 per ounce and then crashed in two or three days. I'm not one of those morons.

Not that I'm advising anyone to get them, but what would be the counterparty risk with gold ETFs? You don't believe their guarantees that they are backed up with actual gold? eg: https://etf.invesco.com/gb/private/en/product/invesco-physic...

Personally, I don’t. The audits are few and far between, and I haven’t followed it closely, but there were several instances in time where the (gold ETF + physical future commitments + whatever else they counted) required more gold than was known to have been mined and not used in industry.

What this means is that, at moment in time, if the music stopped, someone would be left without gold - though with the distributed nature of everything, it’s hard to say who.

Fake bars are routinely discovered in storage, collateral, etc, see e.g. https://www.nasdaq.com/articles/chinas-kingold-shares-tank-o... for the most recent high profile (but by no means unique) example.

Even if they have the actual gold, they have the actual gold. If they decide not to give it to you, there needs to be enough of a functioning court system to remedy that; and even then it may take time - just because you have a legitimate claim to that gold doesn't mean a court can easily decide that you're the only one with a legitimate claim to that gold.

Even with a functional court system you can lose it with the stroke of a pen[0]. Physical gold however would require more effort to take from you.

[0]https://en.wikipedia.org/wiki/Executive_Order_6102

That's true, and it's a risk. I am unclear on whether it should be technically considered "counterparty risk", although it plays out similarly.

>Just try to get delivery of a gold bullion

It's fairly trivial to get lots of gold just above spot price. https://www.apmex.com/product/75/10-oz-gold-bar-brand-name

>And if you succeed, try selling it into the system again, without losing 30%.

In the scenario where the markets are collapsing and you need to sell gold for cash it's possible or even likely that it could be worth more than what you bought it for and even if not the discount rate you accept for selling it back may be worth it either way. If the market dropped 50-80% and you are only taking a 30% loss on gold that's clearly worth taking.

It's incredibly easy to buy gold. I just started dabbling in that area but it's dead simple.

I go back and forth on gold a lot. I keep a very small amount of my money in gold, but I’m literally thinking “if things really get down to it, I can trade this for food”

But that type of mental exercise does not work well for many people. Especially imagining a system where our fiat currency is effectively useless.

Expecting that you'll be able to trade gold for food is assuming that the state after the collapse will fall into a very narrow band of "collapsed enough that the financial system is gone" and "not so collapsed that the food supply is gone." You might even call it... the Goldilocks zone. ;)

And for that matter, assumes you will be able to find safe places to trade gold for anything. Unless we go back to a gold-rush style economy where there are scales all over the place you can trade gold by the gram, the smallest tradeable gold will be coins which are worth $1600+ each. Try taking that to the local grocery store.

Half Sovereigns are ~$300

https://www.atsbullion.com/gold-half-sovereign-coins/

Also many people who "invest" in physical bullion also invest in things like silver. A 1 oz silver eagle is basically a $20 bill. Gold can be traded down to silver if the economy is in that state.

There's also 1/10 ounce coins and other things.

>the smallest tradeable gold will be coins which are worth $1600+ each

Not really accurate, you can get rounds down to 1/10 oz which are worth ~$200. In any case the USD value of a gold coin in a collapse situation is obviously irrelevant. If fiat really does collapse barter is obviously going to be the default way to trade goods and gold could easily be used as it was in the past.

I guess total collapse is something I don’t particularly worry about, since I won’t be here to worry.

I think partial collapse is more likely scenario (of the two).

I would assume a Venezuela-like collapse would be what you're thinking? Would gold help much in that case? (Honestly don't know, probably depends if the person you're trying to trade the gold to believes it will be easy for them to trade the gold to someone else when the time comes)

Can't really speak for Venezuela but lets say if currently 1 oz of gold is as valuable as a Macbook worth ~$1800 and in a hyperinflation event a Macbook costs $200,000,000 perhaps 1 oz of gold could be worth a Macbook? You would then just trade your coin for $200,000,000 and buy the Macbook. Obviously a massively simplified scenario. Perhaps there are sources out there on how people have dealt with hyperinflation?

Why wouldn't you plan for that? The only plan you'd need for the total collapse situation is to have a revolver to eat a lead sandwich with.

You don’t need a complete meltdown to profit off of gold. You just need a little pandemic and some inflation to see a spike. The trick with gold is to rebalance it when it spikes. It’s not a very good “buy and hold forever” asset class.

In a meltdown you're not looking for a profit. At least, not traditionally. You're looking to have more-than-zero.

If things have gone to shit so badly that people are trading food for gold, I hope you bought guns too because very unfair people are going to be coming for your gold.

I honestly don’t know of anyone who owns physical gold who doesn’t also own a firearm for personal defense.

I mean, in world where you’re trying to trade gold for food gold is a “fiat” currency as well. It has no intrinsic value and if we’re struggling to get food and water I’m not going to want to accept anything for my food except strict bartering.

If you’re buying gold for the end of the world you’d be better off buying cigarettes and tiny bottles of booze.

Shotgun shells and cans of beans

Not sure that makes sense? Gold's value was typically based on scarcity and it's multi-millennial status as a thing of value? Why else would much of the world have based their currency on gold itself?

Gold isn't a "fiat" currency. It's a commodity that acts as a store of value. A fiat is paper which is asserted to have a specific value (likely unenforceable in a post-apocalyptic world). A commodity has a value because that's what the market will bear.

Gold does have intrinsic value. It's used for electronics plating and for jewelry. Other precious metals can augment gold as commodities, each having different intrinsic values. An example of a metal which might have no intrinsic value in a post-apocalyptic world is platinum or palladium, which are primarily used as catalysts for emissions equipment on cars (no refined petrol => no driving => no need for platinum/palladium).

I think the statement about cigarettes and booze is correct (as well as toilet paper and ammo), except they have different lifespans and durabilities. Also, consumables will get more rare as time goes on (like dollar bills that erode, tear, burn, or are lost), whereas precious metals may keep in-tact.

Would a post-apocalyptic world really care about electrical conductors and crafting new jewelry, though? It feels like everyone is making assumptions about what people would want in such a world.

I'll be the first to admit that it's a contrived model because 95% of people would perish quickly if we lost all energy and food supply chain. But if anyone survives, soon after hoarding the immediate needs (air, water, food, security, shelter) will eventually convert to specialized jobs, which is when bartering is less useful than a standardized currency.

But the idea that gold doesn't have some sort of special status is strange to me. People don't talk about doorknobs or topaz when they diversify from financial products (stocks, bonds, cash, etc). Cryptocurrency fails to be useful if there is no reliable electrical grid or network. Gold has for long recent history (until about WW1) backed almost all currencies, so it has significant precedence.

And jewelry is useless to me, but most people carry some form of jewelry and some cultures even store lots of gold in jewelry in case they need to run/escape. It's not useless to have a store of value shaped to fit your body.

Even the tiniest gold coin costs over $200. For bartering, silver, Mountain House, and ammunition make much more sense to hoard.

Probably a mistake to assume the USD value of something is relevant in a collapse situation. As you said ammo could end up being far more valuable that it currently is. Similarly Gold's utility as a way to transfer value could make it much more "valuable" in that situation.

$80 for a 1 gram coin

https://www.apmex.com/product/201564/2020-1-gram-gold-maple-...

Do you have an idea just how tiny 1 gram of gold is? It really isn't practical for bartering.

Yep, tiny, diameter is 8mm

It has a diameter of 8mm and a thickness of "yes". It's incredibly fragile, too. Doesn't make for a good bartering coin.

In the Argentinian collapse, many preppers found their gold coins useless to trade. No one would give them anything close to fair value for it because no black market seller was able to assay it to verify that it's real gold. Junk gold like jewelry is what really moved, and preppers switched to hoarding rings and necklaces and whatnot.

Interesting insight. I always thought gold/silver coins would be more useful than jewelry.

I mean, how can you verify if a ring or necklace is actual gold, but not be able to verify a coin?

I guess using the age-old method of density perhaps? do you know what did process to exchange jewelry looked like?

I think it's more that a ring or necklace is more easily scratch tested for hardness, harder to counterfeit, and less valuable individually. If I show up with a gold krugerrand (1oz, approx. $1,800 at today's prices), expecting to get that value or even half, you're not going to give me that value without somehow testing it. A basic density test involves both scales and beaker with water for volume--who's going to carry that around in the black market where others are trading things at DVD scale prices? If I have a bunch of gold and silver wedding bands in a ziploc, though, they're the equivalent of loose change and the risk calculation is different, especially since gold jewelry is almost as common pre-collapse cash.

The lesson I took is that a pure gold economy depends upon a level of infrastructure that just isn't present in economic collapse conditions. At best you're holding something that will retain value after things become normal again.

Makes sense.

I guess this is one of those things that sound good 'on paper' , but after deeper analysis it's not so straight forward.

Like others said, it's probably easier to trade toilet paper, cans of food or cigarettes than ounces of gold.

The main prepper whose account I read had a great post-mortem on his first prep effort, that basically went "lots of chocolate and DVDs and other small luxury items". Gold jewelry wasn't even the thing he was investing in to exploit the black market: a massive DVD collection was. Accessible luxuries like a movie you haven't seen are gold in those conditions. People can sock away 100 kilos of rice, but after six month's eating only that, they'll kill their own children for a bit of chocolate.

One of the threads I read maybe a decade ago about Argentina’s financial collapse at the time, was that in hind sight they’d wished they’d bought gold and made adulterated rings out of it. There was a lot of bartering, and most gold jewelry was trading under the assuption it was the most common karet (14?) by weight, and having some rings at a slightly lesser amount (or even the same) would have been way easier than trying to trade pure gold.

I don’t have a sense for how bad things need to get before making your own rings becomes a viable hedge, but I don’t think the US is quite there yet.

If things really get that bad (and I don't think they will) you could probably trade ammunition for food as well. It also lasts a very long time (when stored properly) and arguably has more of an intrinsic use than gold.

There's a significant resale overhead to gold. Who's to say it's not tungsten somewhere in the middle? Are you going to microprobe the whole thing in the post-apocalyptic hellscape?

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