Consider_this

Gold, Silver and Deflation

1. We did hide it. The house was ransacked. It's surprisingly easy to find things if you don't have to keep things tidy.

2. Your scenario: Gold becomes like Drugs/Contraband, that owning it can get you into trouble at airport security, metal detectors, random stops by cops. I'm not sure it's as easy to do that as you think, the risk is too great. It's like running through airports with an underwear full of cash -- if it's so risky to do that with cash, imagine doing that with METAL gold!

In any case, the debate with deflation or inflation ultimately depends on which of the two powerful forces wins in the end:

1. (Deflation) The 600 trillion CDS actually cases cascading-cross-defaul... Building default pressure on debts and demand slacking feeding into lower employment and deflationary spiral down.
2. (Hyperinflation) The Governments successfully inflate away debt, pumped up *main-street's* money supply or legislate inflation into economy.
(This is non-trivial and much harder than goldbugs realize. Japan had a housing bubble, and they weren't able to inflate their way out of it no matter how they tried. (A)Zero Inflation Rare Policy ends up pushing on a string as nobody is willing to borrow [ so the interest-policy never becomes currency ]. (B)Massive printing with an existing debt-base is also deflationary because we still have mortgages/debt that haven't fallen into trouble yet -- the moment you print too much money, interest rate will skyrocket, and now you have a new round of debt default/deflation even on people that were relative strong before -- resulting in even more powerful deflation force than before! )

These two are ultra-powerful forces colliding into each other right now. think Superman vs XMen. Which one wins will decide our fate. Our relative calm right now (compared to what will be coming) is a quirky byproduct of the fact that there's no winner yet.

Gold, Silver and Deflation

It is good to question Gold.

As Gold is an unproductive asset, almost exactly like houses, except that you can't (easily) make more of it (have to dig hard).

The trick to owning any non-productive asset is to forecast future demand for such asset, as that is the sole source of any "growth" in value.

In other words, if less people want it next month, then it's price *will* go down, since on it's own, it doesn't produce any money. If for whatever reason (Think rallies times), there are alternative investments that is growing fast and catching the popular attention, then gold will lag and even go down.

Right now, the main drive for gold going forward is fear. Fear of currency collapse, fear of stock market, fear of govt intervention/hyperinfl...

And yet, in the real economy, money base is quickly shrinking. We're staring into deflation, which is due to de leveraging and declining total debt/credit. Essentially, there is simply less money to go around.

This creates a "wedge" situation. If fear is constant, then the fact that money is in decline asserts that Gold *must* drop in price simply because there's less money to buy it. For gold to go up, the rate of increase in fear must exceed the rate of decline in money-availability.

In a sense, we're in a "bubble" of gold, but like any bubble: the Market can remain irrational much longer than you can remain solvent.

It is also true that bubble is in the eye of the beholder: (1) Are we building a gold bubble that will eventually burst (when fear subsides or currency-deflation becomes too extreme to support the gold prices), or (2) Are we actually unwinding from the great fiat currency bubble built over 60+ years and Gold is the actual indicator of true "value"?

Economics aside, there's also true issues with owning gold physically that anyone should deal with:

1. Theft is a non-trivial problem. My family have actually lost physical gold because we've been burglarized. The total loss ratio is 100%, which is much worse than simply owning, say, GE stocks. Crime is going to get worse if economy really worsens to a point that gold is useful.

2. Govt confiscation is outlawing is non-trivial too. Just look at governments in history during troubled times. Look at what happened during the Chinese Communist Cultural Revolution, where owning gold is illegal and it's confiscated. Part of current gold's value is it's liquidity because there's a market, if the market disappears as it becomes illegal to trade gold, then by virtue of being forced into black market, gold *will* lose it's liquidity and have to pay a premium to trade.

3. When gold is one day finally more useful than all the other fiat out there, we may very well be facing global world wars and social collapse. Which countries whose govt cannot pay it's police and military is able to maintain peace for long? In that scenario, owning gold may very well be like having a red target painted on you. You may need to swallow it or bury it to keep it.

Notice #1 - #3 fulfills the irony that "when you truly need something, you can't/don't/are unable to have/keep it anymore".

So, these are issues to contend with when you want to own gold.

My advice is own some/enough gold to buy a ticket out of where-ever you are, but don't bet your whole worth on it, because it will not save you during extended unrests.