The prudent investor never keeps all their eggs in one basket or rather in the case of physical gold, in one place. Anyone indulging in the act of holding physical bullion already knows this. If not, then they get an expensive lesson. It's not really any different than those who put their faith in places like Enron, MF Global, Lehman Bros. etc. IMO, if you live in a flood zone and one subject to the follies of the Atlantic Ocean, might think a bit before keeping their stash in the basement. There are other alternatives.