Surviving A Global Depression – Is Gold The Right Hedge?
There seems to be one investment that has integral and virtually eternal luster. From the times of the earliest civilizations, people all over the world have been transfixed by the apparently magical properties of gold. Egyptian pharaohs were buried in heavily gilded tombs. In later times, much of the exploration of the New World was driven by the desire to find El Dorado, the mythical city built of solid gold.
Investment opportunities for gold include buying equities in gold mining companies, or mutual funds that invest across a spectrum of gold stocks. However, many people prefer to be able to touch their gold (and keep it nice and safe under their mattress), therefore gold bullion and coins are very popular. We have to clearly keep in mind at this point that we have to foresee a time when there is a general breakdown in the very essence of the structure of our society. In these cases, a paper document stating that you have the right to something, whether it be a plot of land, a government bond, or a chunk of gold can be effectively meaningless and utterly worthless. The actual possession of a particular object is the only true determination of its ownership, thus investing in some mining company that grants you a tiny fraction of one percent of the gold deposits in some mine in South Africa or China or Australia is completely pointless at a time of global turmoil. Sure, you own that part of the gold, but are you going to go to South Africa and go dig it out of the ground yourself?
These days, gold seems to retain its value, regardless of political or economic uncertainty, and in some cases outperforms any other investment. Gold’s value tends to rise whenever confidence in the economy is shaken and a depression will likely trigger a rise in gold at first. At the time of writing, gold had shot up to almost $900 an ounce. Indeed, if the depression remains in the Low scenario range, then gold may be an excellent investment. It is not outlandish to expect that by the end of a Low depression season, gold would have exceeded its all-time highs. The problem with gold is that it has abstract value. Nothing much of indispensable value can be done with gold. It is primarily an adornment and indicator of value rather than being a value in itself. In other words, during a Low scenario, $900 could buy me an ounce of gold or 2,000 cans of tinned beans. Those cans of beans would keep my family alive for a year, but what good would the gold do us? If the time comes when survival is of primary interest, you may not be able to trade your ounce of gold for 2,000 cans of beans. You may not even be able to trade it for a single can. The value of anything is simply what you can trade for it, and when it comes down to a choice between a lovely metal and a filling meal, you can be assured that most of us will opt for the latter.