The logic for buying gold/silver?

[lonejacklarry]

Gold bugs can be very entertaining.

You are correct, Phil. Most of them rely on old stories such as gold has been the accepted material of wealth for 5,000 years, etc. I wonder how folks survived in the places where there was no access to gold or silver.

A little lesson regarding gold that I learned 40 years ago. The lesson relates that there are two theories for holding gold:

The greater doom theory- This theory is the proverbial SHTF scenario. Basically, that if the SHTF, one can takes his Krugerrand down to the corner store and buy gas. That is, of course, assuming that there is gas at the corner store. Also, it assumes that there will, in fact, be a corner store.

The greater fool theory- This scenario works differently. Basically, some fool buys gold for speculation and hopes some greater fool comes along and offers more money for the gold. This is much like the world renowned pyramid schemes.

No offense meant to any gold fan here. The "theories" have been around for a long time and I'm not the original author.

 

[walnutred]

Years ago I mentioned to someone who had been though more than one war and economic upheaval that I had bought some silver bullion. He laughed and asked "Why?". I explained it was so I would have something of value if the dollar collapsed. He laughed again , then apologized. He said if that is what I wanted the silver for then don't buy bullion, buy scrap grade US silver or gold coins. They would be easier to trade than bullion cubes because they have a recognized metal content. To me what he said made enough sense that I followed his advise.

 

[pharmer]

Just like guns, I don't spend the "rice and beans" money on precious. If/when silver hits $15/oz., I'll buy 30-40 oz for the price of a revolver. It will give less enjoyment but it will give "diversification." Joe

 

[ChattanoogaPhil]

Thread started March 2013.

Since March 2013 gold has lost about 30% of it's value.
Brutal lesson in hedging against inflation.

 

[Kanewpadle]

Thread started March 2013.

Since March 2013 gold has lost about 30% of it's value.
Brutal lesson in hedging against inflation.

I'm no expert but I fail to see the logic. When both were at their highest I saw people spend thousands. With that logic, I should buy stocks at their highest and hope they keep going up.

 

[keith44spl]

I used to have a lit'l dab of silver and gold....

Nows, I have beans, biscuits and bullets...that will trade
most anywheres for anything in my neck of the woods


.

 

[Faulkner]

Buying precious metals like guns are not the best "investments." They are hedges against unforeseen calamities like the ones looming just over the horizon. I bought a bar of silver for $760 in 1980. For most of the last 33 years it has been underwater investment wise. Inflation calculator says $760 in 1980 would be $2100 today. With silver being around $28 oz, not a raging success. The same $760 invested in 60 shares Disney stock @$13 at the same time, would be worth about $165,000 today (2 4 for 1 splits and a 3 for 1 in this period). I own both silver and guns but not for investment purposes. Joe

I think you have your figures backwards . . . $760 in 1980 would be worth $262 today. It would take $2100 today to equal $760 of buying power in 1980.

 

[g8rb8]

There are all the typical answers here but I tend to agree with those who have mentioned timing. The below graph shows there were terrible times to buy stocks (i.e. leading up the major corrections/crashes especially before 2000 and 2008) and terrible times to buy gold (i.e.before its run up to around $1900 per ounce in 2011). It's interesting to note the volatility in the S&P 500. Depending on how you look at the S&P 500 you could fairly say it had not increased at all over the period 1999 to 2013 however over that same period of time gold more than quadrupled. On the other hand someone could correctly point out gold has dropped roughly 40% the past 4 years and the S&P 500 has increase roughly 50%. Timing.

 

[arjay]

as they say,when everyone is buying it's time to sell!

 

[e3mrk]

Gold and Silver are pretty but in a real SHTF situation I can see it being almost worthless.
If paper money is no good and the country is in a Mad Max situation I can see places charge one Gold Bar or two Silver Bars for a Hamburger.
Food,Water,Ammo and Medicine will be the most sought after things in a scenario like that.
Ammunition could bring a premium as a lot of Law enforcement would stay Home to protect Their Families so we would pretty much be on Our own.

 

[rwsmith]

Gold and silver...

They are worth money anywhere in the world, regardless of economy. Sometimes prices plummet, but their value has increased steadily over the years. I'd prefer gold, as silver is an industrial metal and not scarce. The Hunt brothers cornered the silver market back in the 80's and the price went sky high, but when they were put out of business it went bust. About the only way gold would become worthless is that if everybody in the world was starving and even in the worst times, there are always some that still hold the wealth.

An interesting note was a sci fi story by Rod Serling where a group of men stole a large quantity of gold and slept in suspended animation in a cave for 100 years until the statue of limitations had run out. On waking up, they kill each other over the gold but we find out in the end that gold is now synthesized, and essentially worthless.

 

[ChattanoogaPhil]

Gold: A no-yield investment that is selling for about the price of production which essentially makes it hardly worth the effort to even get it out of the ground. When the world is ending and seas are rising, fill your pockets and it will make things easier on ya.

 

[Skeet 028]

Just a little story. Right after WWII early 1947. certain things were impossible to find. Father in Law needed a tractor...allocated... He went to a tractor dealer and with US gold coins went to the front of the line to buy a Ford tractor and all needed implements. Yeah gold coins were outlawed for use as currency by the gummit..but somebody sure figured they were worth having. Silver(coinage) is the thing to buy now as it is seriously undervalued. I even see signs at gun shows where some dealers will take silver US coins on gun purchases..

 

[Bajadoc]

When you own the S&P 500 (or any low cost quality stock mutual fund) you are paid DIVIDENDS on a regular basis. It is not about the price of stocks at any given point in time. It is about receiving income in the form of DIVIDENDS an REINVESTING that income OVER TIME that creates wealth. Gold does not pay dividends, has a carrying cost (cost to own) and there are front and back end costs when buying and selling. Gold may be used to store wealth but you have to time everything exactly correctly to pull it off. Doesn't usually work that way in real life.