"No Mr. [Savings] Bond, I expect you to die!"
So about a month ago I bought some gold coins. I believed that they would appreciate, but expected it to go slowly. My thinking was (and remains) that it's silly to save dollars in the bank, when the value of the dollar is in decline. From purely a measure of spending power, the money that you put in the bank- even if it accrues interest- is less each day. If you put $1000 in an account earning 5% last year and didn't touch it, the interest you earned would not offset the decline that the $1000 has seen. That completely sucks ass. So how can you at least preserve the spending value of your savings? Well, there is the market, which is volatile as all hell, despite insane infusions of artificial cash. Then there is gold (or other precious metals, but gold is the most liquid in a financial sense).
Now, a large tip of the hat is owed to O here. He's the lesser half of Pants and doesn't blog himself. He's been a fount of wisdom in this area for me, and for the most part underscored what I was suspecting. The best thing he told me was to avoid these folks that hawk numismatic gold coins, and just deal in spot gold pricing. The short story here is that once upon a time during the depression, FDR called in all privately owned gold, and it became illegal to own gold. Really. The only exceptions that were made were done for numismatic reasons (collectable coins). Therefore, the Gold coins minted before 1933 were fair game. These are the same coins that are pushed by the likes of ITM Trading. They will say "Hey! They made owning gold unlawful once before- it could happen again" as if somehow if there is a next time the government would honor the same Pre-1933 clauses. Feh. In exchange for this so-called assurance, you'll pay 2 to 3 times spot gold pricing. Yea!
So put that nonsense aside, the core arguments in favor of gold are solid, whether it's in the form of ingots, coins, or (holy cow) bars. Ingots are available in the same weights as most gold coins, but may people don't understand or recognize them. From a liquidity point of view, they are more difficult to buy and sell, and therefore less attractive. Coins are available in a variety of sizes and from various nations, and of various purities. The Kruggerand, for example is something like 90% pure gold, but weighs more than one troy ounce, because they contain an ounce of gold, plus copper (I think that's the deal).
The gold American Eagle coin is .916 fineness (purity), and is commonly traded.
Alternatively the Canadian gold Maple Leaf is .9999 fineness gold, and is similarly available, but is of the highest available purity.
Before you go feeling like we can't even compete in the minting of gold coins, there is an American gold coin of .9999 purity and it's the gold Buffalo.
I'm sticking with this and the Maple leaves. The Austrians and Australians also make .9999 fine coins, and the Chinese have a .999 fineness coin, and maybe if I get a wild hair one day, I'll add these to the mix, but it's not my goal. My only goal is to try to preserve the VALUE of what I'm earning. Schmoopie and I talk about this in terms of cash on hand (well, you know- in the bank) versus gold, which is less liquid, but WAY more stable, and sometimes vacillate on what is the right balance for us. Here's where things get "interesting". That graph at the top, is a 30 day chart. Thirty freaking days! That's 13+% in 30 days. If you loaned money at that rate, your local I-Team Action News Consumer Advocate reporters would be banging down your door asking you to justify the unlawful usury you perform. Well perhaps not, but that's a crazy return over 30 days. And there is a corollary here too- gold tends to behave contrary to the dollar. In other words, when the dollar sinks, gold rises, and vice versa. Whoa. Somebody call in the crash cart for the dollar! Stat!
Now I'm wondering if I should continue to buy as savings allow, and while I certainly wish I had purchased more a month ago, I don't think this is the top. He's my prediction for the next 24 months: The Republicans will lose the elections- possibly on purpose. When you look at their candidates you'll see what I mean (and Scott from Oregon, I'm not trying to pick a fight, but I think Ron Paul is a bad choice too). In any event, the Dems will win big and then proceed to a.) implode due to infighting and the complete inability to organize anything, and b.) be framed economically by the Repubs so that it appears that the Dems are responsible for the unavoidable impending economic disaster. The Fed (which I have disdainfully mentioned before) will continue to lower rates and inject fiat currency into the market as necessary to forestall the upcoming "correction" until after next November. Once the election is decided, they'll stop and let the chips fall where they may, and the talking heads (including that woofer Bartiromo) will say that the market "lacks confidence" in the Dems, blah blah blah. You can imagine the script, and it's all so stupid. Fox News will feed the proles the Fact-Free-FUD that they know so well, and in four short years it'll all be business as usual, and they Dems will again be impotent and distractible.
In about 12 months the economy of this country will seriously buckle, and a lot of good folks will be hurt. A lot of rich people will still be rich, and they will not panic. Foreign investment in property will soar. Housing prices will fall. The rich will get richer. The decline of the economy will last for at least 12 months once it begins, and will not start to climb until the Repubs can take some credit for the improvement. If I'm even close to being right about this, the dollar will sink further necessarily. When that condition is true, buy gold. One ounce damn near hit $850 today. A barrel of oil broke records too. I'll be buying fewer coins (not being a rich fellow), but I'm still going to buy.
A note from Safety Sam: If you decide to buy gold coins, be advised that the coin dealers only accept cash, and that in this post-PATRIOT ACT era, safety deposit boxes may now be examined by the authorities. You'll want to find some other place to keep your gold.
Also, if anyone has any experience in establishing bank accounts overseas, and in foreign currencies, I'm all ears.
Kitco.com - Live spot gold prices
USAGold.com - Images and descriptions of gold coins.