Hi CR,

I think there's a difference between saying gold is a hedge against deflation and gold is an insurance policy. I disagree that gold is a hedge against deflation - that is, a hedge against your net worth decreasing during a significant decline in the money supply. The reason being, that it is very likely to fall in value relative to cash (ie its price falls in nominal terms), along with almost everything else, as people sell whatever assets they can to raise the cash they need to pay their debts and living expenses. That would mean you should (in theory) be able to buy gold at a lower nominal price later, along with all manner of other things, with any cash you've managed to hold on to. Of course in the case of gold there may be other complicating factors, such as it being made illegal for individuals to buy or hold gold, and that might mean the theory doesn't work quite so well in practice.

I would agree that gold is an insurance policy - a hedge against gross disruption of the economy - and as such could be said to have a place in a reasonable strategy for the wealthy, even if its nominal price is high at the moment relative to what it might be later. However, gold ownership can be problematic in practical terms, as it's such a concentrated store of value. Making ownership illegal wouldn't prevent you from owning it, but it would make it dangerous to use it to exchange for anything you might need. (Using it could put you on the radar of the sort of people whose radar you would really rather not be on.) But if you have a lot of money, and you want to store it in a form that will hold it value in order to pass it on eventually to your nearest and dearest, then gold ownership is not such a bad idea. Gold will hold its real value indefinitely (for example, an ounce of gold would have bought you a really nice toga in Rome and would buy you a really nice suit now).

It really depends on how much money you have, and whether you can afford potentially to put a big chunk of it out of reach for a long time. If you don't have a lot of money, and therefore have to be selective about what preparations you make, then I would say there are far better things you could do with it than buy gold, even as a hedge against disruption. Getting out of debt is very important, and if you still have money after that then some land with self-sufficiency features (ie well and septic system, good soil, fuel-wood supply etc), some renewable energy equipment, hand tools, and an alternative means of transport would be very useful - far more useful than gold. Helping your nearest and dearest to reduce their vulnerability to disruption would be good as well, as no man is an island.