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Going for the Gold

Ken Cutler

MY FATHER WAS president of J.S. Collins and Son, a local hardware and lumber chain in southern New Jersey. Occasionally, he’d take me to the flagship location in Moorestown after hours. While he was back in his office doing important business, I wandered around the empty store and general office areas. At 10 years old, it was easy to get bored.

One day, I got the idea to pull out an empty drawer from one of the office desks. I turned it over and with a marking pencil I wrote: “July 1932. I am old and about to die. I buried the gold in the Collins parking lot. It’s near the front.” I replaced the drawer before my dad got back, smiling at how clever I was. The secret message would never be read until some future date when someone pulled the drawer out and turned it over. And importantly, I had finished without Dad catching me in the act.

A few years went by. I had long forgotten about my prank. Collins was going out of business and much of the old furniture was being sold. Dad came home one afternoon and I overheard him telling Mom that, “A guy who bought one of the old desks from Collins found something about gold being buried in the parking lot scribbled in one of the drawers. He got all excited and said, ‘Where are they talking about? Let’s go dig.’” I remembered what I had done and was filled with a deep sense of teenage satisfaction. My dad got a good laugh out of it when I told him the rest of the story.

What is it about gold? I’ve known people who, distrustful of the stock market, financial institutions and the “system” in general, keep a large portion of their wealth in gold. Certainly, there’s a multitude of voices out there seeking to convince people that the ultimate economic collapse is almost upon us and that the only safe havens are gold and perhaps silver. Everyone has seen the infomercials.

I confess I’m not immune to the attraction. I am uneasy about the unfathomable national debt that’s been amassed, not just in the U.S., but in countries all over the world. Sometimes, I wonder what would happen if a massive electromagnetic pulse were to erase all the stored electronic bits of information that represent a huge portion of our collective wealth. At such a time, it might be beneficial to have a cache of gold handy.

I have not purchased gold in more than 12 years. I did buy some American Eagle gold bullion coins and some old U.S. gold coins over a period of five years ending in 2011. On average, I paid about $1,250 an ounce for my small clutch of coins. Gold has lately traded at around $1,950. My back of the envelope calculation indicates my purchases have appreciated at around 4% a year. That’s not awful. It’s a better return than I would have received by investing in savings bonds over the same period. But it hardly qualifies as a great investment.

In his bestselling book The Only Investment Guide You’ll Ever Need, Andrew Tobias had this to say about gold: “Gold itself pays no interest and costs money to insure. It is a hedge against inflation, all right, and a handy way to buy passage to Liechtenstein, or wherever it is we’re all supposed to flee to when the much-ballyhooed collapse finally materializes. But if you’re looking for an inflation hedge, you might do better with stocks or real estate. In the long run, they will rise with inflation, too. And in the short run, they pay dividends and rent.”

I don’t plan on selling my gold coins. If I were to do so, there would be additional losses due to the buy-sell spread that a coin dealer imposes. No, I plan to let them sit in my bank safe-deposit box for my children to deal with after my wife and I are gone. Maybe they’ll need them for the much-ballyhooed collapse. I sure hope I don’t.

Ken Cutler lives in Lancaster, Pennsylvania, and has worked as an electrical engineer in the nuclear power industry for more than 38 years. There, he has become an informal financial advisor for many of his coworkers. Ken is involved in his church, enjoys traveling and hiking with his wife Lisa, is a shortwave radio hobbyist, and has a soft spot for cats and dogs. Check out Ken’s earlier articles.

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