I’m not a gold bug, but it has held up fairly well over the centuries. My nest egg is invested in a diversified portfolio stocks and bonds.
But how is everyone’s Dutch tulips, Weimar Republic Deutschmarks, and Enron stock doing?
My 500lbs of rice and Hershey bar example might have been overly simplistic, but an ounce of gold is still worth more than Dutch Tulips, Weimar Republic Deutschmarks, and Enron stock. So the gold bugs got that going for them.
I like gold-- I like the look of it, its heft, its rarity (formed by supernovas, sort-of)… but the people that push it are real sleazeballs. I’ve seen those late night tv informercials where there’s some guy, implying that they are the federal reserve and “gold has gone up 800% since 2000” or whatever, trying to leech thousands off the elderly or gullible, marking up “MS-70 graded” bullion coins. And the paranoid survivalist types where “gold is the only currency” (see thread debating this on this site) or “FIAT is a scam”, etc. really ruin it for me.
I do have a few gold coins, but because I like them, not so much as a speculative investment or “hedge.”
Buying gold is one thing; paying the overpriced amounts to those commerical hucksters is another. If I was in the market, I’d find a coin dealer or jeweler that offer to sell gold at or only slightly above the spot market price. And, believe it or not, you can buy gold from Costco at good prices.
Gold dealers seem to have a terrible rep. In every sci-fi story I’ve read involving gold, when the protagonist sells some to get a bit of cash, the buyer has some thugs follow the character to see if they have more and steal it. 
It seems like a reliable way to hold cash value (and more portable than real estate), but I’d never use it as an investment. As someone wrote above - some in a safe deposit box as a contingency seems like the best use of it.
If things are really apocalyptic, nobody wants your gold. Gold in the past was propped up by a few islands of stability (eg the Spanish monarchy) that wanted gold. But now they don’t and they never will in quantity. And if those islands of stability exist, what you want is their currency. A zero-interest bank deposit in Switzerland might make sense. At least nobody can steal them from you as you cross international borders.
I don’t doubt gold or silver or platinum might make sense under certain circumstances. (Coins look cool for example.) But those circumstances are rarer than one might think.
Cracks me up Gold can grow in price by over 200% in the last 10 years and that isn’t inflation but the second gas goes $3.00 people vote for Fascism.
I agree. I recognize that the bank vault and all its doors and high-strength walls are intended to keep strangers away from the valuables. Law enforcement is not considered a stranger and the vault provides no protection from someone with a badge.
Oh my. Do you assume there is no middle-ground between business-as-usual and the total collapse of civilization? 
In fact financial or societal collapse can take various forms. It is not at all difficult to imagine scenarios in which economic activity continues but paper money loses a huge portion of its value.
Many tons of rice would be needed for a significant hedge position. Since cost of storage and safe-keeping (though not protection from hungry rodents) is often cited as an argument against gold, suggesting rice as the alternative is … an “interesting” idea!
An individual currency? Sure, but ALL paper money? That’s a whisker’s breadth from general societal collapse.
Gold is pushed by a lot of crackpots, doomsdayers, and late night hucksters. But when it comes down to it, there are many well-respected economic theorists and investment analysts who advocate gold as being a PART of a smart, well-diversified portfolio. The “permanent portfolio” is one (equal parts stocks, bonds, gold, and cash) that has many adherents. No legitimate investment advisor that I know of advocates your entire investment amount in gold. I’ve heard gold investment as described as salt on food. A little bit makes everything better but too much will ruin it.
And 25% of a portfolio would have the same result on returns as 1/4th lb of salt on 1 lb of meat: unpalatable to inedible.
Do you have data to support that claim?
Articles I can find support even slightly more than that as reducing risk and increasing returns compared to a 60/40 balanced portfolio only. (Dividing the rest 60/40)
I am sure exact time periods impact any analysis, and they claim 15 to 20% as the best.
The explanation is mainly based on the fact that stocks and bonds are increasingly correlated as classes. Gold not.
Personally my 401K is just under 6% GLD now and otherwise back to fairly equity heavy, 74%, and remainder in two bond funds.
The middle ground has happened in numerous places over the years. Russia for example after the USSR saw significant economic collapse. A lecturer once told us of his travels there in the early 1990’s. People in Moscow got paid every day at noon and rushed out to buy anything they could. He said then at quitting time, there were lines of people at the subirban subway stations, holding up what random things they’d managed to buy - tee shirts, cabbage, shoes - hoping to trade someone else for something else they needed. people’s state pensions were essentially worthless, lacking inflation adjustment. Cash/bank savings became worthless very quickly.
Argentina was a moderately well developed society where money has gone crazy multiple times. Less that perceptive leaders have found that printing money was easier thatn actually balancing budgets, and misuderstood how that influenced inflation, like Weimar Germany. You don’t have to be Nicaragua (recalling bills to print extra zeroes) or Zimbabwe (printing 100-trillion dollar banknotes) to destroy an economy. At that point all you have is worthless; even stocks may become worthless if during the hard times those companies go bankrupt. Yes, the factories are still there, but not your share of them.
It could be as simple as the oil shock of the 1970’s, when the cost of a primary commodity that (lierally) fueled our economy went up to 10x previous level. We had a decade of high inflation around 10%, with things like inflation baked into union contracts and other calculations, until it took raising the bank rate to 18% to put the brakes on. In a situation like that, older bonds, for example, lost a lot of their real-life value. Bonds issued at the expected higher interest rates were a windfall when inflation went down.
The key in all economies is stability. Too significant a disturbance in the force will change everyone’s calculations bigly. All you can do is plan for the more obvious problems, which is the purpose of a balanced portfolio.
Gold is a legitimate investment, but I just don’t see the value in it. It was essentially flat from the early 80s through the early 2000s. Then a 10 year runup, followed by 10 years of nothing. Now it’s on a runup. CAGR over that period is 5% ($519 in Jan 1980, $2673 right now).
Meh. I know the S&P crushed that, and I’m too lazy to see what bonds have done, but right now a total bond index fund is yielding 4.5%
So if you held gold that entire time, now would be a good time to cash in. But your S&P 500 holding would be vastly better off. So the best I can see is if we have a major correction right about now and you need cash.
And if you can predict that you wouldn’t be on the SDMB arguing about investment strategies. Well, unless you’re posting from your yacht.
Then surely you can identify one of these well-respected economic theorists who advocate gold as being PART of a well-diversified portfolio. Then we can discuss their argument. I’m not saying they don’t exist. I do claim that gold’s utility as part of a well-diversified portfolio is way over-rated. And 1/4 gold strikes me as a lot, especially considering that’s its share of all global assets is one half of one percent.
Well, if we all only tried to make it 5% of our portfolios, we’d hit the 25% mark very soon.
Well, here is a trusted advisor-
That, then is a NO.
Then
Given its low correlation with other asset classes, such as stocks and bonds, gold can provide an important role in portfolios: diversification. Gold’s ability to act as a “store of value” can help mitigate risk during times of market volatility and economic uncertainty. It may be able to serve as a hedge against inflation. In addition, gold historically has exhibited an inverse relationship to the U.S. dollar, meaning as the dollar weakens, gold prices tend to rise.
But I cant find any “well-respected economic theorists” just two investment companies- one of which said NO, and the other- maybe.
So, I’d like to see a well-respected economic theorist that advocates this.
On the other hand, in January 1979 I sold my coin collection for what I considered to be a fair market price. Almost immediately after that the Hunt Brothers decided to corner the silver market. By the time the market crashed in March 1980, the price of silver had climbed by more than 700%.
Of course, I needed the money in January 1979, so all of “hedge against inflation” stuff was just economist babble for me.
But then it tanked- and bad. So, not much a a hedge- a commodity bubble- because silve is a commodity- just like Gold. Gold is not special.
Here’s a theoretic economic argument for gold: you can’t beat the market so just buy assets in the proportion held by the market. I guess that would be about 1/2 of 1% for gold.
My response: hold on, cowboy. A huge share of that is held by central banks. A significant share of it is held by those without access to developed country financial institutions: the unbanked in India and some Chinese buy gold because of a scarcity of alternatives. Those are the sorts of players you can beat on average, unlike say market timers or interest rate speculators.
Incidentally, we’ve discussed gold in the past and those interested should click links:
I quote myself:
Abstract:
This paper examines several of the explanations commonly provided regarding gold and its price movements. We consider the safe haven, inflation hedge, and dollar destruction hypotheses. The results are mixed. Our data do not support the theories that gold is a safe haven or an inflation hedge. We find that gold is a zero-beta asset and there is a strong negative correlation between gold and the value of the US dollar in the post Bretton-Woods era. The decomposition of gold prices under a semi-structural model find the aggregate demand shock, monetary policy shock and precautionary demand shock of gold all only have modest influence on the price movement of gold.
Note that zero-beat assets won’t go up when the stock market goes down. Zero beta means “Uncorrelated”, not “Negatively correlated”. More:
Instead of viewing gold as a special asset, we suggest the data suggest it is more
reasonable that we view gold as another currency, whose value is a reflection of the value of U.S. dollar.
So do I think that buying gold is a crackpot move? Nah. Mostly ill-advised, but not entirely. It’s shiny. I owned some for a while (not anymore), though not a substantial share of my savings. There are a lot of bad arguments for buying gold though, which makes it a great topic for this message board.