Over the weekend Moneytalk radio host Bob Brinker chastised a caller for wanting to devote some percentage (in the area of 10%-20%) of his asset holdings to gold. The caller reasoned that in the case of some globally catastrophic event (major flu pandemic, largescale nuclear war, a big meteor hitting the planet) which sent international markets plummeting, gold represents the best stability of value guarantee. Even though T-notes and most bank investments are backed by the US Treasury, the infrastructure might not be there to deliver the cash, which in any case would probably be of little value due to astronomical inflation.
Brinker doesn't like commodity investments period, as the investment advice he dispenses is consistently targeted at the valuation of assets at retirement. And in terms of realizing a competitive return over some extended period of time, gold is really the bottom of the barrel, worth about the same today as it was worth in 1980. Brinker, in rejecting the caller's suggestion, agreed that gold is a bulwark against major losses during a recession, but so are treasuries, especially I-bonds which offer protection against inflation. Better to hold those, as they will continue to modestly gain value during much more frequent periods of economic growth.
It seems to me the two were talking past one another. Gold serves as an economic anchor, performing well during downturns. After the tech bubble burst earlier in the decade, gold rose steadily until the beginning of '06, and has since inched back downwards, suggesting the economic slump is fully behind us. Similarly, it spiked in the late seventies and early eighties during a period of high inflation. During the recession of '87, it also shot upwards, reaching a highmark that it wouldn't return to for more than a decade. Although comparisons over several centuries are confounded by new deposit discoveries (potentially altering the price of gold significantly without respect to other economic indicators), gold reached its zenith just as Columbus was sailing westward, presaging the era of the most explosive economic growth in the history of modern man.
This in contrast to I-bonds, which merely hold their value during recessions (but don't hemorrhage value during periods of economic growth or dollar strengthening).
The caller wanted absolute assurance, period, while Brinker wanted absolute assurance assuming the US federal government continued to exist as it does today. In his antagonism toward commodities, Brinker refused to give his approval, which was all the caller had sought after in the first place.
Brinker should've delved into the caller's plans more deeply, instead of rejecting him out-of-hand. If the goal is to find a guarantor of economic value given the most catastrophic of circumstances, how is he holding the gold? If he's using a company like Kitco, is he planning on using a pool account, storing with a global bank like HSBC, or keeping the bullion at his own residency? Only the latter would make sense, given an infrastructure meltdown.
Has he considered what might be superior even to bullion in the basement? Like ten pound cans, jugs of water, knives, firearms, a maintained garden, gasoline and kerosene reserves on-hand, a bike with durable tires, residency outside of metro conurbation and preferably even outside of the suburbs, proximity to a stocked body of water, fishing equipment, keeping in good shape, and the like? If a disastrous return to the primordial state came upon our world, these concerns easily trump what sort of currency stores he has in storage.