everyone should own some physical gold. The amount doesn't have to be tremendous, merely sufficient to cover one's personal needs for a short time frame in the event of an emergency
i am not easily outgloomed, but in the kind of scenario where a few thousand dollars worth of bullion would be needed because the dollar had no currency value in the US, i think i would rather have a few firearms and a few thousand rounds...and i'm against guns!
i, too, look on gold as kind of a hedge against fiat currencies, but the scenario i envision where it would be a good asset to have is a much less severe scenario, where there is an increase at the margin in distrust of the dollar and other fiat currencies. i don't expect an outright Gotterdamerung, but keep in mind that gold and mining stocks do not require such extreme circumstances to increase in value.
after all, in the 1930s and the 1970s, people did not stop using paper currency, but gold mining stocks did splendidly in the 30s and we all know what gold did in the 70s.
another way of looking at gold, in terms of asset allocation, is its low covariance with other asset classes, which means it helps reduce portfolio volatility. this concept is much more digestible for conventional, non-gold-nut type investors, and could lead a lot of them to devote several percent of their portfolios to gold/miners even while maintaining a "stocks for the long run" outlook.
of course, since the market capitalization of the universe of gold miners is just a fraction of a percentage point of total global assets, even an incremental drift toward gold allocation could have an enormous impact on the stocks. even the biggest miner, NEM, is too small in capitalization to be heavily invested in by institutions without causing some heavy upward price pressure, imo. the same goes for bullion itself.
thus i see gold partly as an insurance policy against a coming bear market in fiat currencies, and partly a speculative bet on an increasing (re)acceptance of bullion as a legitimate asset class. just marginal changes are sufficient to keep me bullish. in the severe scenario you envision, i think we will all have other worries besides how our portfolios are doing. |
