Devoted to understanding the basics and fundamentals of investing

Larry,

Thanks for this posts.

Several years ago I purchased some gold and silver coins as a emergency portion of my portfolio. I have this locked in a safe deposit box. I have largely ignored the rise in gold valuation.

Several questions:

1. Do you think that holding gold for emergency situation is a valid strategy?

2. With prices being high at this time, should I consider selling the gold at this point?

Richard,
Thanks for the comment. You have two forces pulling on you right now. One force is how to protect yourself in an emergency. The other, is how to maximize the value of the assets you hold.

You ask if the strategy of holding gold coins for emergencies is valid.

Historically, gold and silver coins have traded well even when fiat currency (paper not backed by specific assets) has blown up. So the strategy is valid. I would couple it with home food storage and production (a vegetable garden) as food might become more valuable than gold in that kind of emergency.

However, that type of emergency is a very low probability event, and so you might not need it in your life time. If it isn't too much, it shouldn't hurt.

As to your second question, should you lock in some gains, that is harder to answer. It depends on how much you have versus how much you think you might need for emergencies.

I have a friend who says you really never have a profit until you sell something. Unrealized gains won't put food on the table.

In general, I am in favor of taking money off the table as an asset goes up. Reinvest it in something that has better potential for continued profits.

So, if I owned gold and silver coins (which I don't) I would probably sell some. I would buy them back when prices fell again which they certainly will eventually.

Back in February of 1980, my wife bought me a $20 St. Gaudens gold coin as our first anniversary present. It is a very pretty coin, and swings gracefully from the bezzel of my keychain, together with my car and house keys, although it is a fairly common coin in the specialized world of historic gold coins which were once minted in this country. I think she eventually mentioned to me that she had paid a Chicago numismatist about $870 to purchase that coin from him, which probably set a record sale price in the coin collector catalogs which still survives as a high print to this very day. Thankfully, she bought it with the intention of making a gift, and not an investment. But it sure proves that love is blind to any economic valuation!