Kuta Beach

Kuta Beach

Saturday, 10 January 2009

How to Bury Gold

I don't have any gold, but I wish I had because gold seems to be the only asset going up at the moment. It is true that gold has gone down in the last year but in the last 5 years it has gone up a lot. I think holding 50 per cent gold and 50 per cent cash should protect you whether or not the economy is going through deflation or inflation.

Gold is purchased because investors fear that currencies like the US dollar could collapse. If this happens, civilization itself could collapse, and gold would likely be the new currency.

Dave Ramsay believes that investing in gold is a waste because gold has historically performed badly and because, in an end-of-the-world scenario, survivors are likely to use barter instead. I believe that there will be room for barter but the problem with barter is the need to establish a double coincidence of wants. This makes barter inefficient and is the reason why money is used today. When you go to the petrol station to buy petrol you do not pay with apples grown in your backyard because the petrol station owner may not want apples.

If you buy gold, one question that pops up is how to store it. If you store it in a safe deposit box in a bank, problems can arise. If civilization collapses, banks will likely collapse.

If you keep the gold in your home and hide it around the house, thieves can steal the gold. There is a good chance they will use metal detectors to find your gold.

I recommend investors diversify. Keep maybe a third of gold in safe deposit boxes in various countries. Then bury your physical gold bullion.

I recommend investors buy a huge field of land in the country. Then dig thousands of holes in the ground. Bury the gold (or silver) in only some of the holes. Only you should know which holes the gold is buried in. Then get some copper bullion and bury these in the other holes. Copper is normally much cheaper than gold. If a thief tries to dig to recover the gold, he is likely to find lots of copper, which will mean that he will have to work a lot to recover a little. If you know which specific holes have the gold then you can recover it with more efficiency.

Keeping copper bullion buries is important because metal detectors cannot tell the difference between copper and gold.

Let me give a numerical example. Right now gold is selling for about US$800 per ounce, which is $16 per pound. Copper is selling for $1.50 per pound. Suppose you have 1000 holes. Each bar or coin of gold or copper you have is one pound in weight. You have 100 pounds of gold and 900 pounds of copper. This means that in total all the precious metal you have buried will equal $2950 in value. Suppose also that it takes one hour to dig a hole.

If you didn't know where the gold is hidden, you would have to spend one hour on each of the holes, which means you will spend 1000 hours digging and you will get $2950 for it. This means you earn $2.95 per hour. Not much. Suppose instead that you knew where the gold was buried. Then you will spend only 100 hours and you will make $1600 worth of gold. This means you earn $16 per hour. This is better. (You will leave the copper in the ground because it's not worth it digging it up and it's only there to fool the metal detectors.)

You can change these numbers around a little. Maybe bury more gold together, have more holes, and so on, and you can configure it so that the payoff of knowing where the gold is is so much higher than not knowing that any thief would not bother trying. If the payoff from knowing where the gold is hidden is $100 per hour but the payoff from not knowing is, say, 1 cent per hour, then a thief would likely go find someone else to rob.

While you're putting copper and gold bullion in the holes, I recommend throwing some seeds in there so that you can make some money off the field. Maybe grow some coffee plants and then sell it to others in exchange for gold or silver. Gold is an inert metal, so it shouldn't harm the plants. I not sure about silver and copper. I know for sure that too much copper in your body is not good for you.

1 comment:

Anonymous said...

metal detector is pointless, if you don't know the general location of the loot. There are just too many desert area to hide things.