# Line of Credit (Credit line) for physical gold?



## ARXD (Aug 23, 2012)

Hi
I would like to invest in physical gold & silver
I have no faith in any form of fiat money or any form of paper security in today world finance system...

Is it a good idea to use Line of Credit (also known as Credit line) to purchase physical gold?
What risk involved, and is there a better way to invest in physical gold.

(Side question - can I get any tax benefit for investing in precious metals?)
Thanks.


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## timelessfinance (Aug 24, 2012)

Using leverage to buy, without any diversification, an extremely volatile asset that fails to produce any dividends, interest, or rent? Seems legit.

"I have no faith in any form of fiat money or any form of paper security in today world finance system..." Yes, 'faith' and investing are an extremely good mix. Add some emotion, and your "strategy" of buying one or two metals, and you've got yourself a winning strategy. Since your lack of faith pretty much rules out any asset class (I'd say real estate but people are going to be renting with fiat currency and it's in a massive bubble anyway), I'd say buying gold or burying your cash seem like the only options. Either way, you'll end up underground.

Speaking of living underground... one massive tax benefit of gold is that, when gold becomes extremely useful for gold bugs (after the evil house-of-cards of fiat currency collapses, you can eat your gold and live in it), there won't be a government around to tax you, anyway!


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## rusty_shackleford (May 18, 2012)

Do what you feel is right but I highly doubt you are going to find anyone here tell you it's a good idea. The obvious risks being the gold goes down in value, get's stolen, etc. and then you're upside down on your loan. And there are no tax credits that I'm aware of.


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## MrMatt (Dec 21, 2011)

What good is physical gold? If the economic system collapses and money is worthless who's going to trade anything for a few heavy blocks of shiny metal?


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## peterk (May 16, 2010)

Spam?


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## Sherlock (Apr 18, 2010)

No, there are actually a lot of people who think like that.


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## Miser (Apr 24, 2011)

Currency debasement will happen slowly, not overnight.
Your PM's appreciate faster than your cost of credit and your a wizard.
You can buy ETF's that hold gold bullion on margin. Just another way.


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## peterk (May 16, 2010)

Oh...
ARXD - I have a gold coin with 0.1947 Oz. gold in it. I'll sell it to you for 450 Canadian fiat dollars. Message if interested.


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## Potato (Apr 3, 2009)

ARXD said:


> What risk involved, and is there a better way to invest in physical gold.


Sure there's risk involved. The risk is that you use money that isn't yours to buy something you hope will go up in value. If that something goes down in value (or even goes up but at less than the interest rate on the loan), you may have trouble coming up with the money to cover the loan. Is there a better way to invest in physical gold? Yes: don't borrow money to do it. 

Is it a good idea to use a LoC to leverage into gold? Well, that depends. If you live in a world where there is no faith in "fiat money" then yes, borrow as much as you can to buy "hard" assets like gold, guns, and canned goods. The debt doesn't mean anything in that world anyway, it's just meaningless paper. Go nuts, and take advantage of those poor suckers who believe in using a common medium of exchange. If you live in the real world, where people have to eventually pay back their debt or be faced with bankruptcy (and/or broken kneecaps, depending on the lender), then it's not such a great idea to borrow money to pile into an asset that's just come off a 10-year bull run. The question I guess you need to ask is: your own beliefs aside, do the banks, loan sharks, enforcers, cops, lawyers, and judges in your area have faith in fiat money? Or somewhat more seriously, do you expect your lump of metal to appreciate by more than the hit in interest and transaction fees?

There's no tax benefit -- you can't write off the interest like you could were you to borrow and invest it in something that produces or has a reasonable expectation of producing income.


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## Miser (Apr 24, 2011)

Potato said:


> Sure there's risk involved. The risk is that you use money that isn't yours to buy something you hope will go up in value. If that something goes down in value (or even goes up but at less than the interest rate on the loan), you may have trouble coming up with the money to cover the loan. Is there a better way to invest in physical gold? Yes: don't borrow money to do it.
> 
> Is it a good idea to use a LoC to leverage into gold? Well, that depends. If you live in a world where there is no faith in "fiat money" then yes, borrow as much as you can to buy "hard" assets like gold, guns, and canned goods. The debt doesn't mean anything in that world anyway, it's just meaningless paper. Go nuts, and take advantage of those poor suckers who believe in using a common medium of exchange. If you live in the real world, where people have to eventually pay back their debt or be faced with bankruptcy (and/or broken kneecaps, depending on the lender), then it's not such a great idea to borrow money to pile into an asset that's just come off a 10-year bull run. The question I guess you need to ask is: your own beliefs aside, do the banks, loan sharks, enforcers, cops, lawyers, and judges in your area have faith in fiat money? Or somewhat more seriously, do you expect your lump of metal to appreciate by more than the hit in interest and transaction fees?
> 
> There's no tax benefit -- you can't write off the interest like you could were you to borrow and invest it in something that produces or has a reasonable expectation of producing income.


Correct me if I'm wrong here.
If you invest in an ETF gold stocks or bullion wouldn't that be treated as an investment?


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## Causalien (Apr 4, 2009)

Wouldn't MRE be better? 30 yea shelf life. Enough to last till retirement.


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## dogcom (May 23, 2009)

I believe the recipe for disaster is to first have no debt. Then have the survival gear, food, weapons, shelter and so on and then some gold and silver.


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## smihaila (Apr 6, 2009)

dogcom said:


> *I believe the recipe for disaster is to first have no debt*. Then have the survival gear, food, weapons, shelter and so on and then some gold and silver.


What do you mean? Can you detail a bit on that? Thanks.


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## andrewf (Mar 1, 2010)

I thought MREs only had a 3 year shelf life. There aren't too many foods that stand up to storage longer than 3 - 5 years without becoming completely disgusting if not inedible.


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## CanadianCapitalist (Mar 31, 2009)

Miser said:


> Correct me if I'm wrong here.
> If you invest in an ETF gold stocks or bullion wouldn't that be treated as an investment?


I'm with Potato on this one. Gold bullion or gold bullion ETFs most likely won't pass the "reasonable expectation of income" test. After all, gold bullion holdings are never going to pay dividends or interest.

Gold stocks or gold stock ETFs will pass the "reasonable expectation of income" test. After all, a stock even if it doesn't pay a dividend now, might pay one at some point in the future.

See this CRA bulletin: http://www.cra-arc.gc.ca/E/pub/tp/it533/it533-e.pdf


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## dogcom (May 23, 2009)

smihaila said:


> What do you mean? Can you detail a bit on that? Thanks.



During a financial crisis you could lose your job and have trouble making the payments on your debt. Your LOC gets called in or in the case of your broker you get a margin call.

During the 2008 financial crisis gold held up well after the crisis in the later fall of 2008. The reason gold fell like everything else in the early fall of 2008 was because of the great need for cash to pay down debt, margin calls or to meet redemption requirements in mutual funds and so on. So when your back is against the wall you are forced to sell whatever you can, whether you like it or not at whatever price you can get.

Bottom line is your call for gold to go to the moon could be dead on but you may never see those gains because you were forced from your position at a possible big loss because you were desperate for cash to meet debt requirements.


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## andrewf (Mar 1, 2010)

Holding bullion is not an investment, it is a speculation. You are speculating that the value of gold will rise, and you are not expecting any income to flow from holding gold.


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## ddkay (Nov 20, 2010)

Moving to a gold standard would immediately put us into a deflationary spiral. Fiat is the only thing keeping us afloat, like it or not. Zero chance any country will move back.


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## Causalien (Apr 4, 2009)

I remembered dry food shelf life is around 30 assumed MRE goes through the same treatment. Then found the source for you: http://ce.byu.edu/cw/womensconference/archive/2005/sharing_stations/pdf/52a.pdf

Granted the definition of edible is different (bacterial content vs when the food stopped tasting good). Still civilian MRE should have at least 7 years life while still tasting good. 

The old canned army food is known to last 100 years without bacteria. Whether or not you can stomach it is another story.


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## VJ99 (Apr 24, 2012)

I love the irony of pairing:
"I have no faith in fiat money" with "Can I get a tax benefit"
LOL
You have no faith in fiat money, therefore no faith in government but you are still going to file your taxes?!?!?




ARXD said:


> Hi
> I would like to invest in physical gold & silver
> I have no faith in any form of fiat money or any form of paper security in today world finance system...
> 
> ...


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## andrewf (Mar 1, 2010)

Causalien said:


> I remembered dry food shelf life is around 30 assumed MRE goes through the same treatment. Then found the source for you: http://ce.byu.edu/cw/womensconference/archive/2005/sharing_stations/pdf/52a.pdf
> 
> Granted the definition of edible is different (bacterial content vs when the food stopped tasting good). Still civilian MRE should have at least 7 years life while still tasting good.
> 
> The old canned army food is known to last 100 years without bacteria. Whether or not you can stomach it is another story.


I know NASA was having trouble making food that was still appealing to eat after 5 years. They were trying because for a mission to Mars, they would need to produce meals, and transport them to Mars before sending humans. 

And appealing food is surprisingly important to human (mental) health. You can probably subsist on food that old, but it takes a toll.

I imagine dry or frozen foods might stand up better. The trouble with foods stored at ambient temperatures is that even absent bacteria, chemical reactions are still occurring.


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## Causalien (Apr 4, 2009)

Maybe coca cola is a better substitute for currency? If it can preserve for a long time. Need to find some research for this. It's a source of instant energy along with dwindling stock in an apocalyptic scenario.

Just had an Eureka moment. Hard liquor will probably be best.


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## Young&Ambitious (Aug 11, 2010)

Moonshine has done well through good times and bad. I think you're onto something Causalien :tongue-new:


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## Spudd (Oct 11, 2011)

I doubt Coca Cola has staying power. One time, we moved, and I found a can of Pepsi in one of the boxes. I had no clue why it was there so I put it in the fridge. My husband found it, went "oooh, Pepsi!", cracked it open, and drank. He said it was the worst thing EVER. It had been a collectible can that he had saved as a memento for several years. Apparently pop goes bad after a few years! And I got in trouble for messing up his mint condition collectible can.


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## andrewf (Mar 1, 2010)

See, if the world turns into a post-Apocalyptic hellscape, I'm cool with the idea of dying as a consequence. Not sure why people would put so much effort into making sure they could survive in that event.


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## Causalien (Apr 4, 2009)

From the gold bugs and doomsday prophets on this forum I am prett sure some of you are part of the survivalist group, if not a closet survivalist.

Anyway the goal is to be at a beach somewhere like paradise and writing human history instead of being used as sex slaves or sold as prime cut meat. Sometimes circumstances won't allow you to die peacefully. The secondary goal is to be totally independent of tech and comfortable when exposed to the elements.

I've made preparations on the hardest parts, still have to learn how to use a knife and how to track animals. 

I wonder if qualit hard liquor will be a good currency if home made moonshine is readily available. 

Any other suggestions on a commodity to stack?

Must be necessary, must be able to preserve for 30 years. Sustain life in some way. Somewhat portable.


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## Spudd (Oct 11, 2011)

http://www.stilltasty.com/articles/view/35

Spoiler (no pun intended): honey, rice, sugar, hard liquor, maple syrup, vanilla extract, vinegar, cornstarch, salt


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## Causalien (Apr 4, 2009)

Spudd said:


> http://www.stilltasty.com/articles/view/35
> 
> Spoiler (no pun intended): honey, rice, sugar, hard liquor, maple syrup, vanilla extract, vinegar, cornstarch, salt


Ahhh nice. I'll be stock piling rice, honey, hard liquor and some maple syrup cubes. 

Another important one I found. Most popular ammunitions.


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## ARXD (Aug 23, 2012)

*OP response:*



dogcom said:


> During a financial crisis you could lose your job and have trouble making the payments on your debt. Your LOC gets called in or in the case of your broker you get a margin call.
> 
> During the 2008 financial crisis gold held up well after the crisis in the later fall of 2008. The reason gold fell like everything else in the early fall of 2008 was because of the great need for cash to pay down debt, margin calls or to meet redemption requirements in mutual funds and so on. So when your back is against the wall you are forced to sell whatever you can, whether you like it or not at whatever price you can get.
> 
> Bottom line is your call for gold to go to the moon could be dead on but you may never see those gains because you were forced from your position at a possible big loss because you were desperate for cash to meet debt requirements.


*Thank you very much for your educated answer, - you are right, taking Line of Credit (Credit line) for physical gold will be a very bad idea.
I guess that I just buy little at a time, avoiding been debt as possible.

Thanks!*


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## ARXD (Aug 23, 2012)

*OP response:*



Potato said:


> Sure there's risk involved. The risk is that you use money that isn't yours to buy something you hope will go up in value. If that something goes down in value (or even goes up but at less than the interest rate on the loan), you may have trouble coming up with the money to cover the loan. Is there a better way to invest in physical gold? Yes: don't borrow money to do it.
> 
> Is it a good idea to use a LoC to leverage into gold? Well, that depends. If you live in a world where there is no faith in "fiat money" then yes, borrow as much as you can to buy "hard" assets like gold, guns, and canned goods. The debt doesn't mean anything in that world anyway, it's just meaningless paper. Go nuts, and take advantage of those poor suckers who believe in using a common medium of exchange. If you live in the real world, where people have to eventually pay back their debt or be faced with bankruptcy (and/or broken kneecaps, depending on the lender), then it's not such a great idea to borrow money to pile into an asset that's just come off a 10-year bull run. The question I guess you need to ask is: your own beliefs aside, do the banks, loan sharks, enforcers, cops, lawyers, and judges in your area have faith in fiat money? Or somewhat more seriously, do you expect your lump of metal to appreciate by more than the hit in interest and transaction fees?
> 
> There's no tax benefit -- you can't write off the interest like you could were you to borrow and invest it in something that produces or has a reasonable expectation of producing income.


*
OP response:
Thanks! very good info.*
I don't think that gold or silver will be the world future money, nor the the world will end.
but I do believe that the US dollar days as a "World Reserve Currency" is soon to be over, and a new World Reserve fiat currency/basket will be born in order to keep the world economies going.
- Since the CAD is somewhat tied with the USD I believe that gold and silver are good way for hedging my savings.
That's all.


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