How safe is digital gold?

skeptik · Post by **skeptik** » 22 Jul 2008, 08:42

adam2 wrote: It would still be worth something though! paper money and other savings or investments would probably be valuless under such circumstances.

Not necessarily. I can envisage circumstances (pretty horrible ones which I have no desire ever to experience!) where gold would have the same value as sand, as you can't eat either of them.

MacG · Post by **MacG** » 22 Jul 2008, 08:45

jcw wrote: Gold's greatest usefulness is as money, with all the desirable characteristics (a store of value, not just a currency).

Nops. Gold is not a "store of value". At least not by any physical laws. True value is found in stuff you need to survive and thrive - food, clothes, shelter, tools, knowledge etc.

It's extremely arrogant to believe that you will be able to have access to the result of other peoples work simply by owning gold.

If gold was mined only for dental repair and electric contacts, I would not have the same problem with the earth-raping. My main argument is that the majority of the gold is mined for perverse reasons.

Little John · Post by **Little John** » 22 Jul 2008, 08:48

adam2 wrote:I would not trust any such scheme, quite apart from the risk of fraud or failure, what about the risk of the governmemt requistioning or stealing gold "hoarded by the idle rich" perhaps because they need said gold to pay russia for gas or oil?
We cant have babies freezing while gold is being hoarded can we!

The private ownership of gold coins, purchased for cash, has much to commend it, tell no one, and hide it well against theives.

A stash of food, fuel, blankets, candles, warm clothing, seeds and tools etc is more likely to save your life than a few gold coins.
If however you already have stocks of the above, then gold is worth considering.

Agreed.

If you are going to invest in gold, I would always reccomend actual physical bullion. Also, I would not have it stored by anyone other than yourself in this country. If things get really bad and there is a rush for gold, the authorities could easily sieze it. There are historical precedents for this.

As for electronic gold. This is basically fiat and will have all of the fractional reserve lending lies involved with it that are inherent to all fiats. I wouldn't like to be in the position of going to the gold broker and asking for my real gold at the same time as all of the other people. I strongly suspect that many of them would be sorely dissapointed to find it is not actually there

SILVERHARP2 · Post by **SILVERHARP2** » 22 Jul 2008, 09:25

[quote="stevecook172001]As for electronic gold. This is basically fiat and will have all of the fractional reserve lending lies involved with it that are inherent to all fiats. I wouldn't like to be in the position of going to the gold broker and asking for my real gold at the same time as all of the other people. I strongly suspect that many of them would be sorely dissapointed to find it is not actually there[/quote]

That depends, ETF's may fall in that category but goldmoney doesn't lend out their gold and Perth mint you can specify if you want allocated or unallocated storage.

Re the other posters who see gold as immoral etc. I would counter that it is the price we pay because we cant trust governments or other people to look after our financial interests. I'd compare it in some sense to the whole security industry, how much resources are put into stopping people take stuff, it isnt productive, it is a waste of scarce resources but at the same time it is necessary.

jcw · Post by **jcw** » 22 Jul 2008, 09:55

MacG wrote:
jcw wrote: Gold's greatest usefulness is as money, with all the desirable characteristics (a store of value, not just a currency).
Nops. Gold is not a "store of value". At least not by any physical laws. True value is found in stuff you need to survive and thrive - food, clothes, shelter, tools, knowledge etc.

If people want to buy and sell they need currency to do it. Gold is capable of retaining value over long periods of time and has done so for thousands of years, unlike any paper money.

MacG wrote: It's extremely arrogant to believe that you will be able to have access to the result of other peoples work simply by owning gold.

After it is spent the seller owns it, to save or spend later as they choose. I don't see what's arrogant about having a currency which cannot be inflated willy-nilly, and the privelege to do so held by select groups only.

MacG wrote: If gold was mined only for dental repair and electric contacts, I would not have the same problem with the earth-raping. My main argument is that the majority of the gold is mined for perverse reasons.

So a fair money system is perverse?

Most is used in jewellery, but Asians who are the biggest buyers regard the jewellery as their savings, a bit like the family silver.

jcw · Post by **jcw** » 22 Jul 2008, 10:01

stevecook172001 wrote:If you are going to invest in gold, I would always reccomend actual physical bullion. Also, I would not have it stored by anyone other than yourself in this country. If things get really bad and there is a rush for gold, the authorities could easily sieze it. There are historical precedents for this.

As for electronic gold. This is basically fiat and will have all of the fractional reserve lending lies involved with it that are inherent to all fiats. I wouldn't like to be in the position of going to the gold broker and asking for my real gold at the same time as all of the other people. I strongly suspect that many of them would be sorely dissapointed to find it is not actually there

GoldMoney sells allocated gold and silver. The metals are vaulted in Zurich and London. I would recommend Zurich over London. Lists of the bars are published. It belongs to the customers.

You seem to be suggesting that GoldMoney is fraudulent.

That can lead to legal action against this website if they discover it.
(I'm certainly not telling them.)

RenewableCandy · Post by **RenewableCandy** » 22 Jul 2008, 11:35

My one foray into precious metals has been the purchase of a metre of silver wire (the sort used by jewellers). The theory was, to float a marge-tub with 2 9V batteries in series in our water-butt with 2 silver wires connected to the terminals and dangling into the water, resulting in silver ions in the water which would make it safe(r) to drink. My problem is that sheer cowardice prevents me from testing it!

There's a device from California called the Floatron, which works on the same principles, for keeping swimming-pools fresh, except being Arnie-territory the thing's solar-powered!

PowerswitchClive · Post by **PowerswitchClive** » 22 Jul 2008, 16:34

You know I find this tread amazing... this is the same polarized conversation that we all had on here back in 2006... and guess what.. the world hasn't come to an end and I have almost doubled my money investing in gold.
The conversation ran along the same lines then... it's immoral, it's expensive at over $550/600, you can't eat it so buy tinned food, it will be useless when the world ends....
In the mean time of course the price of gold is at $960 and a lot of people have made good money and been able to protect their wealth.

MacG · Post by **MacG** » 22 Jul 2008, 17:00

PowerswitchClive wrote:In the mean time of course the price of gold is at $960 and a lot of people have made good money and been able to protect their wealth.

Great attitude. What did those people contribute to society to deserve that money? And what do you tell those who lost money?

The outlook for post-peak processes sure look like a geyser of joy and social cohesion.

[/irony]

PowerswitchClive · Post by **PowerswitchClive** » 22 Jul 2008, 17:11

UndercoverElephant wrote:
MacG wrote:Gold is for optimists.
It will go up in value before it goes down. I just need somewhere to put some money for 18 months or so until house prices have come down. I don't intend to leave that equity in gold after that. I intend to buy another house. It just seems to me that one of the places I should put it is in gold, because I'm convinced that as the price of oil goes up it will be tracked by the price of gold. That is what it has been doing up until now. So if you believe we are at peak oil, gold is a no-brainer, isn't it? If I leave it in a high-interest savings account the maximum I'm going to gain in interest about 2% after tax and inflation. If I buy gold the first time it dips after I get the money, I can't lose...can I? The price of gold could go up by 50%.

I am never to keen on putting my eggs in one basket, it is a good idea to spread the risk, even if all you want to do is invest in gold.
I think 18months is the minimum time you should be investing in this area to see good returns. Although you need to keep in mind that the gold market is quite volatile - silver more so. I do think that gold is still undervalued at less than $1000 and told the BBC Money Programme this, when they interviewed me on the subject a couple of months ago.
There are a couple of bullion dealers in London that can sort you out allocated storage for bullion - ATSbullion and Baird. The Blackrock Gold and General fund is also excellent. I can see no issues as such with Goldmoney, although it’s a myth that allocated insured storage is very expensive. I would prefer Goldmoney over an ETF in gold.... Although Goldmoney's business model is based on the fact that your money is safe even in a banking collapse.. I do fail to see how I can withdraw from a Goldmoney account if such a crisis happened.

PowerswitchClive · Post by **PowerswitchClive** » 22 Jul 2008, 17:19

MacG wrote:
PowerswitchClive wrote:In the mean time of course the price of gold is at $960 and a lot of people have made good money and been able to protect their wealth.
Great attitude. What did those people contribute to society to deserve that money? And what do you tell those who lost money?

The outlook for post-peak processes sure look like a geyser of joy and social cohesion.

[/irony]

You could same the same thing about many commodity investments or any investment that makes money in general and people make their own choices... In the current world, money and savings give you more options, if you chose to ignore this, that is up to you.
It is possible to protect your current savings and make good money, that will give you more options in the future..... Since broadly speaking none of us know what the future will bring.. having options is a good thing.

MacG · Post by **MacG** » 22 Jul 2008, 17:40

PowerswitchClive wrote:
MacG wrote:
PowerswitchClive wrote:In the mean time of course the price of gold is at $960 and a lot of people have made good money and been able to protect their wealth.
Great attitude. What did those people contribute to society to deserve that money? And what do you tell those who lost money?

The outlook for post-peak processes sure look like a geyser of joy and social cohesion.

[/irony]
You could same the same thing about many commodity investments or any investment that makes money in general and people make their own choices...

I see. The old faithful "but everyone does it..."

Personally I get tears in my eyes when I see what mining does to the earth. Add cyanide heap leaching. Or what we have done to food and agriculture.

But I guess it's fine since everyone does it or support it indirectly.

YogiEdwards · Post by **YogiEdwards** » 22 Jul 2008, 18:41

Gold may perform well in the volatile world of commodity markets.

As for arguments along the lines of gold being true or honest money or being a historically constant medium of exchange - any medium of exchange only has the value that people collectively agree it has. If no one accepts my cash, it's effectively not money.

I can't go in to the average UK shop and pay with pieces of gold or silver. They won't accept them. Will people accept gold as money in the post-peak economic wasteland? Quite possibly not. That'll leave all those LATOC readers with gold coins shoved under their mattresses just as stuffes as the rest of us.

Little John · Post by **Little John** » 23 Jul 2008, 01:10

MacG wrote:Gold is probably one of the most immoral investments around. Not only is it almost useless, it takes some serious earth-raping to extract it. I don't know what others think, but I just don't want to encourage earth-raping in order to get an almost useless metal. No way. Keep your gold, I don't want to touch it. The idea to use gold as money is probably even more stupid than our current debt-and-interest based fiat money.

One of the main reasons gold is so useful as money is precisely because it is rather useless. If it had a lot of uses, it would always be plauged with the problem of deflation of the money supply as it was siphoned off to do "useful" work.

The basic properties that all efficient money should possess are:

Rare, so as to minimise the problems of monetary inflation

Relatively useless so as to avoid the deflationary dangers mentioned above

Non-degradeable, again in order to avoid the problem of deflation

Gold has all of the above qualities which is why it has been independantly "invented" as a unit of universal exchange across human history throughout the world.

As for whether gold will ever become useless as a form of money becasue our societies have descended so far down the line as to make direct barter the most efficient form of exchange....

Well...

In a pre-civilisation based tribal hunter-gatherer society one might expect the above to be true. Who knows? We may yet return to that existence. However, that level of decline is still many, many decades away if not a century or two. Indeed, my own feeling is that we will always have some form of basic civilisation. A significantly simplified one in relation to now, to be sure. However, as long as we do, we will always need to have a universal unit of exchange because direct barter relies on a coincident of wants. Something that is most unlikely once you have an economy of any complexity above the most primitive. Gold has always been the strongest contender for this role for all of the reasons mentioned previously.

Little John · Post by **Little John** » 23 Jul 2008, 01:21

in the mean time of course the price of gold is at $960 and a lot of people have made good money and been able to protect their wealth.

Gold has not gone up in value.

The value of fiat has dropped due to an inflation of it's supply.

Which is why it takes more fiat to exchange for gold

Indeed, if you look at the excahnge value of gold over the last century, it is one of the few commodities whose value has remained relatively constant. It does have occassional blips up and down. However, these are always on the back of a deflationary or inflationary spike in the supply of fiat money.

Just like any other ocmmodity in fact.

The only difference with gold, is that it does not get "consumed" like other commodities, so leading to deflation of supply. Also, it is not easy to inflate supply in sudden spikes, so leading to sudden inflation of supply.