Lotta talk of late about investing in gold. Gold has surely enjoyed a run over the past several years, for various reasons, including a weakening dollar. OK, I can’t argue with the premise: investing in gold during uncertain times makes sense. That being said, what’s the wisest way to go about it?

Gold stocks pay dividends and have risen along with the spot price. That means stocks share the downside risk, should gold correct or should the dollar appreciate. That game may or may not have already enjoyed its best results. The good news: if gold continues to rise in price, the underlying stocks should follow and you don’t have to take physical possession of anything. Tho I do wonder how well E-Trade and Schwab will do business if the grid goes down. ATMs won’t work either, under calamitous conditions.

How about purchasing and owning the precious metal itself? You could buy ingots or coins. Let’s suppose you do that. Do you then store them? Storage has its own costs…and can you be certain you can retrieve them, in difficult times. Perhaps you put them in a safe deposit box. Can you be certain you’ll be able to access that box, after an earthquake or other event? Perhaps you’ll choose to keep them in your home. That makes you vulnerable to robbery…and uncertain you’ll even regain access to your own home, following “any event’ that makes gold appreciate in price.

What do we know, so far? Buying gold (and other precious metals like silver or platinum) seems to make sense, just as a hedge. The problem is, where should you keep it? Hey, I’m sure you’ll figure out something.

Here’s what concerns me. You both planned well and got lucky; calamity is upon us, your gold is worth a great deal more than you paid for it and you even can get your hands on it! Hoo-rah!

Things are now probably pretty grim. Broken infrastructure, the grid is down, food and water are in limited supply, civil insurrection, perhaps even the kind of chaos we now see in Haiti. Yeah, better take note of that, the past is often prologue.

Imagine yourself with a broken arm, without water or food. Your Kruggerand or Panda or Maple Leaf is now worth maybe 2K, or 3K or more. Big whoop! Try to buy a liter of water or an MRE. Do you expect change? And now the outside world knows that you have GOLD. Hmmm. That’s a kind of heat I can happily do without.

I’m storing water and food, simply because it makes sense. And if I’m wrong and nothing bad happens, I’m happily alive and still have some storable food and water. I’m also storing pain meds. They’re legally prescribed and I’m a control freak about pain, don’t like feeling dopey and judgmentally impaired. Yet somehow, I suspect that, should “something terrible this way come” and I’m still around, I’ll be pretty successful in trading pain meds for food and water and shelter.

You can’t eat gold (tho it is shiny;) it won’t keep you warm or hydrated. But I’ll betcha you can get laid for a Vicodin or two;)

17 Jan 2009