The logic for buying gold/silver?

[old bear]

gold, Sorry to be morbid but…

I just don't see gold or silver as the "great" hedge against inflation. Any medium is only worth what someone else is willing to pay for it; I So my gold is worth the number of dollars someone else will pay for it, correct?
Now when I'm paid for my gold it's going to be in dollars. If the dollar is so weak that I need more of them to acquire what I need and I sell my gold what have I accomplished but to have more worthless dollars, which may be a short term fix at best.

Now if things really go bad, and the dollar as we think of it is totally worthless and I'm forced to trade, work, or steal for what I need to survive. Well I'm about to old and beat to do anything close to an honest day's labor, so working is out for the most part. Most of the items I own, I would be willing to trade, don't have great value to anyone but me. Let's assume that I have several two ounce gold wafers. Now I decide I need gas for the car, a gallon of milk, and a loaf of bread, so I stop at the local shop and rob where I'm allowed to buy 10 gallons of gas, a stale loaf of bread, and a gallon of milk, so how do I pay for the above? Just how much of one of my gold wafers will I be required to give Mr. shop and rob owner? Using my scenario I think we all know the answer to that, right. So I have three options; I can pay roughly $3,000.00 for the gas, bread, and milk. I can do without the items I want, or worst case I can kill Mr. shop and rob owner and take everything he had that I can carry off. None of these options appeal to me so what are my options here?

 

[BJoe]

I have a bit gold and silver. I did not buy it as an investment, rather a way to preserve wealth. Not unlike food, ammo, SMALL denominations of cash, or utility guns ( no bling bling ). It has its place in a portfolio and also in a SHTF situation.

When people were leaving N.O. because of Katrina there were reports of people NOT giving change for a purchase. If you bought $25 in gas and only had $50 bills it cost one $50 bill. Same way with some stores who would not take credit cards only cash in exact amounts or more.

1/4 to 1/2 silver rounds or gold, and a few hundred in $20's should be enough to get you out of 'Dodge' if need be.

Interesting though that this predator pricing stuff didn't happen when the floods hit the midwest 2 years ago, when the hurricane hit the North East this year, nor the looting, just in Louisiana. Glad I am in the midwest.

Bob

 

[Mike7.62]

Your options are to own silver, in particular pre 1965 US coined silver, aka "junk" silver. Silver is the transactional metal vice gold. Gold is the wealth preservation metal. It has and can be used transactionally, but only if you hold it in small enough coins or wafers, i.e. pre 1933 $5 or $10 US coins, Brit Sovereigns, or the like. 1 gram gold wafers may also be used if you have them, or as a last alternative, you could use a cold chisel and powder scale to weigh out the requisite amount.

edited to add, this is from where the term "pieces of eight" came. Back in pre and post revolutionary America, a milled Spanish dollar was the coin of the realm, and in order to make change for a purchase, the parties would use a cold chisel or similar implement to cut the coin up into eight pieces. Two bits, four bits, six bits a dollar now makes more sense when seen in that light.

The major problem with continuing to use the paper issue as transactional currency is that it will take increasing amounts to do so, and your wages will not keep pace with the inflation, especially if you are on a fixed income, i.e. a pensioner. I seriously doubt that the government will explicitly default on its obligations to social security recipients or .mil or civil service pension recipients, but the paper/digital currencies in which they are compensated will likely not buy them a cup of coffee. The same logic will apply to anyone on an annuity from a private pension too.

As to being able to buy something at the local "stop and rob" that is also very unlikely as the replacement costs for inventory will be increasing exponentially, and it is unlikely that they will be able to replace their inventory at all due to supply chain disruptions. If they do have inventory, they will likely say that they don't to preserve it, and unless you have something of value to trade for their inventory, or something recognized by both of you as having value (PM's) you will likely not consummate a deal.

The death of paper currencies has happened numerous times before in history, and at least 100 times in the 20th century alone in various countries. The collapse of the Federal Reserve Note/US Treasury Bond will be the largest such collapse in the history of the world, as this is the first time in recorded history where every country in the world uses some sort of unbacked paper issue, and ALL of them use the FRN as their reserve. They are all derivatives of the FRN. When it goes, they all go. The knock on effects will shake the foundations of everything built upon it.

You may place your trust in politicians (liars) and bankers (thieves), and in the currency they issue, or in something that is an honest value, has a history of being used as money, and has no counterparty risk, which are gold and silver. The choice is, of course, yours. Choose wisely.

 

[COL Jagdog]

I bought some "silver" from Thibodeaux at the Bayou Chene Bar, Bank and Grill -- it was a deal -- 10 rolls nicely packaged for $20 a roll, 4 years ago --I have it tucked away in my safe -- big, long rolls full of "silver" -- it has "Reynolds Wrap" printed on the box -- who knows what it's worth now!!

 

[loutent]

I learned my lesson early when in my late 20's - I scraped together enough to buy a couple Kruggerands (sp?) for around $750 each - this was in the late 70's - I figure with inflation I would have to get close to $3K to break even today. If you can time it, you might do ok, but in my (limited) market experience nobody outsmarts the market (any market) in the long term.

Bottom line - around 1980, the DJ was 700 - today it's 20X higher. If you are young and have faith in your country, continue to invest and don't panic - or use those panic times as opportunities.

This advice is worth every penny you paid for it

 

[Frank46]

I well remember the buying spree of the Hunt brothers. My mom worked as a cashier and would swap out the silver coins for either bills or clad coinage. She had heard about the selling of silver and we went to one of these places. There was a line out front as they would only let in a few people at a time. One woman had a complete sterling coffee and tea service and all sorts of silverware. Lotta money changed hands in the short time we were in there. From time to time our local paper runs a full page ad by some people who buy gold,silver, antiques,and other stuff. These you have to watch out as they do not pay anywhere near the spot price for precious metals. Oftentimes its the older folks who go to these shows and get screwed. If the foo ever hits the circular air mover than silver and ammo will most likely become the medium of exchange. Frank

 

[chief38]

I do not have the answer to the question anymore than others do as to where gold will be 10 years from now. All I will do here is express my personal feeling based on common sense.......

It would seem to me that if TSHTF and we became a nation of survivalists, gold would be practically worthless. You can't eat it, drink it, defend yourself with it, and as a monetary system to barter with, it would be just about useless. The commodities that would be truly worth something are Food,Water, Firearms, Ammunition, Gasoline, Shelter. Gold in brick or coin form can't really be used for something pertinent to survival unless you use it to cast gold bullets. Gold in paper form (in a crisis) would be good for toilet paper, but that's about it.

Gold is a commodity like oil, coffee, coal, copper, etc and is bought, sold and used to make profits with in "safe times" but these commodities along with gold & silver would not be all that valuable or practical in a true crises. This is just MY opinion of course and hope we never have to find out if I am right or wrong!

Chief38

 

[Comrad]

I look at it as doomsday money. I began as a coin collector but gradually began adding Morgan dollars then Eagles then gold Eagles. It's nice and portable, unreportable and can be liquidated one coin at a time for cash as necessary. For reasons beyond me, people want it and I think it's smart to have some if the SHTF one day.

 

[Stevie]

Yeh...gold..silver...for buying beans, bread and toilet paper after the monetary collapse....just that nobody's sure what the rate of exchange will be...hopefully you will be able to get lots of beans, bread and toilet paper for a Krugerand....but maybe not

 

[Mike7.62]

I do not have the answer to the question anymore than others do as to where gold will be 10 years from now. All I will do here is express my personal feeling based on common sense.......

It would seem to me that if TSHTF and we became a nation of survivalists, gold would be practically worthless. You can't eat it, drink it, defend yourself with it, and as a monetary system to barter with, it would be just about useless. The commodities that would be truly worth something are Food,Water, Firearms, Ammunition, Gasoline, Shelter. Gold in brick or coin form can't really be used for something pertinent to survival unless you use it to cast gold bullets. Gold in paper form (in a crisis) would be good for toilet paper, but that's about it.

Gold is a commodity like oil, coffee, coal, copper, etc and is bought, sold and used to make profits with in "safe times" but these commodities along with gold & silver would not be all that valuable or practical in a true crises. This is just MY opinion of course and hope we never have to find out if I am right or wrong!

Chief38

I hate to disagree, but IMO you're incorrect. The reason that people invented the concept of money was because the barter that you describe becomes unwieldy or impossible if the parties involved in the trade do not or cannot fulfill the needs of the other. PM's do nothing more than facilitate trade by having something that is intrinsically valuable that both parties recognize as being such, and using it to conclude a transaction for an agreed upon weight/amount.

If the SHTF/zombie apocalypse should happen, the items that you listed will be important to have, but unless you have something that someone else needs/wants, and they have something that you need/want, you can't trade. PM's will be used to get around this, most especially silver.

They will also be used to set up the follow on monetary system, whether it's a new PM backed paper currency issued by whatever government is in charge after the collapse of the Federal Reserve system, or a true gold coin system that we had in this country before 1913.

It would be wise to see beyond the dystopian SHTF scenario that everyone assumes may happen, to envision what comes after. Men always rebuild some semblance of civil society after a collapse of whatever system that had been in existence prior, and they had to trade to survive. Metals will fulfill this role again, as they have for over 5000 years. PM's were used to facilitate trade after the collapse of the Roman Empire, and all during the Dark Ages. IIRC, the Roman Denarius was still being used in trade some 400 years after the final collapse of the Western Roman Empire.

It is only recently that people of the West, especially in the US, have had such an antipathy for metals. 50 years of constant propaganda from the Federal Reserve and the banking/financial system which has grown up around it have done their work well, especially in the con of seeing PM's as some barbarous relic no longer needed in the system, and placing increasingly risky, and for most people, incomprehensible financial instruments as vehicles for saving the fruits of their labor. IMO, it is much better to save in something that holds its purchasing power through time, has a proven track record of doing so, and has no counterparty risk, than it is to save in some rehypothecated piece of paper or digital entry that is in reality a chimera, and subject to being confiscated by either a financial entity as collateral for its debt, or by .gov in their increasing quest for more revenue. YMMV.

 

[Stevie]

I about guarantee that if any form of federal goverment still exists after some sort of financial melt-down...they would be on your doorstep quick if you started buying stuff with gold and silver bullion/coinage!!

 

[Mike7.62]

First off, why would they, especially if they haven't passed any laws against doing so? According to Article II Sections eight and ten of the US Constitution, they are legal tender. Also consider that 11 states either have, or are in the process of, passing their own laws making gold and silver legal tender.

Second, even if they did make using PM's illegal, would you rather have them hidden for a future day, or have all of your savings tied up in worthless paper?

Third, how would they track it? It is essentially a barter transaction, and given the counterparty would be just as liable as you for illicit trading, the incentive for keeping it sub rosa would benefit both. The same logic applies to selling/trading firearms and ammunition. Are you going to fore go having them because at some future date .gov may make them illegal? Will you turn them in should they do so? I know that I won't.

That's how black markets work. It is what is occurring in many countries around the world now, including the EU and Argentina. As government increasingly adds capital controls in order to keep a dying monetary system alive, more and more people will turn to black or grey market transactions in trade simply as a survival mechanism. I would hazard a guess that many in this country are doing so too, especially those that have skills, as a simple means of tax avoidance and privacy. In the future, it will become necessary for day to day life.

 

[Brian41]

I have some silver coins and buy more as we can. It hasn't cost us that much over time and just another insurance policy should we ever need it.
I also have guns, ammo and my wife's medical skills for barter should that ever become needed. We have a decent supply of food, medical items and a generator for times without electricity due to storms and other causes as well.
We're thinking of investing more in silver and gold and am in the investigation stage now so threads like this are very interesting to me.

 

[Stevie]

Why would they!!?...Really?...It's not without historical precident that guv's confiscate gold and silver. I would imagine that with the current state of politics in this country...gold and silver confiscation in the event of a financial collapse wouldn't be out of the question.

The Cypress thing I guess will be a sort-of example of guv deciding to 'redistribute' some wealth.

I'm not denying the black market or bartering..nothing like that. This a fact of life now....and has always been a fact of life.

Really..at least my veiwpoint being that hoarding large quanitys gold/silver for disaster use could be disasteous!...could be confiscated...stolen...killed and stolen...worth it's weight in beans, bread and toilet paper..etc

I do think that collecting-up some quanity of gold and silver is probably prudent...and fun too 'cause gold and silver bullion is cool...old Eagles, Francs. and Soverigns are too cool as old collector coinage as well as gold content. I own some gold and silver mainly just for the cool factor.

I can see how having a huge pile of prescous metal in the event of a total collapse...or maybe even a partial collapse would be a good thing...I also believe it would be hard to keep the guv out of your gold-stash!

 

[ChattanoogaPhil]

Gold... eh... like anything else it's a matter of timing.

Gold was around $700 in the early 80s and it didn't rise above that for another quarter century. Meanwhile... the stock market went from around 1,000 to 10,000 as well as paying dividends. Gold... a hedge against inflation or a suckers bet? You decide the timing.

 

[Mike7.62]

@Chattanooga Phil

Sure, and since 2000 when measured in constant year 2000 FRN$, the stock market has lost value. When measured against gold it has lost even more. Nominal gains due to unlimited quantitative easing and survivor bias in the indices do not reflect good value.

All gold does is reflect the ongoing debasement of the paper FRN$. When the purchasing power of the FRN$ was strong, and our debt to GDP ratio was well below 100%, it made sense to save in it and it's derivative products. Now, especially after the recent violations of contract law, (GM), the Sentinal decision, and the rewriting of the bankruptcy code in 2005, and with a debt to GDP ratio of 108%, not so much.

We had a bull market in both equities and bonds from 1982 until 2000. At that point equities entered a secular bear market and are still there. Since then the bonds, both Treasury and corporate, have continued to historical high valuations, but don't have much more room to run to the upside. If not for the constant intervention into the Treasury bond market by the Fed to keep interest rates suppressed and a decent bid to cover at Treasury auctions, the bond market would also be in a secular bear market. Once the Fed becomes the sole purchaser of Treasuries, it will be obvious to everyone that bonds are nothing but certificates of confiscation, especially when everyone who currently holds them begins to unload them into the market and yields begin to rise. Metals came out of their secular bear in 2000, and are in a secular bull now. They will be until real rates of interest are above the real rate of inflation, which will likely never happen until the bond market is allowed to find true market value. The trend is your friend, and the trend now is with the metals and against equities and soon to be against debt issues.

Paper financial instruments nowadays are fraught with all sorts of counterparty risk. The stocks that you purport to "own", you don't, unless you have the actual stock certificates in hand, which are increasingly hard to come by. Most stocks that people think they own are actually held by the DTCC under Cede&Co. What you have in your brokerage account is a derivative of the actual stock. The same applies to bonds. Unless you hold the actual Treasury certificate or corporate bond certificate in your hand, you don't own it. You own a digital derivative of it, which can be used as collateral by the brokerage company or their clearinghouse for their own purposes, and should they lose it, you are at the back of the line to get repaid, behind all of the senior counterparties of the derivatives ahead of you. This is called rehypothecation, and is what was behind the losses of customer funds at Sentinal, PFG Best and MF Global. After the Sentinal decision last year, the court essentially ruled that anything held by any financial entity-including banks and their regular checking/savings deposits-and used by them for collateral is legal, and if they lose it in proprietary trading, you are one of the last to recover your funds.

Unless you have actual possession of it, you do not own it. IMO, in this type of financial environment it makes more sense to hold cash for daily needs and save in metals. To each his own.

 

[Mike7.62]

Stevie,
Until they do make another stab at a 6102 confiscation, I'm not concerned, and I find it difficult to see a circumstance under which it would happen, simply because they do not need the metals to expand the money supply, they aren't part of the current monetary system, and because so few people in this country actually own physical metals. It is less than 1/100th of one percent.

I am much more concerned about currency debasement through inflation of the money supply, violation of property rights and contract law, and 401k and IRA confiscation than I am confiscation of PM's, as they are a much easier target, and difficult to liquidate, especially 401k's. In order to confiscate metals it would require door to door searches etc., and I just do not see that happening, at least not until and unless they succeed in disarming the public. If they manage that, all bets are off as at that point all we're doing is negotiating for our position in the line to the gas chamber.

 

[ladyT]

PM's are defacto currencies and have been since man started to trade for what he didn't have. When the fiat currencys become worthless your PM's will take their place. What you may also want to look at is present day coinage as a store of other metals one may need in bad times. We are talking zinc,copper and nickel.

Now in a modern day portfollio it is recommended that PM's make up 10% of the portfollio.

Ask yourself this question. If for some reason trucks are unable to deliver product to stores how will you handle it.

 

[KJM]

Gold... eh... like anything else it's a matter of timing.

Gold was around $700 in the early 80s and it didn't rise above that for another quarter century. Meanwhile... the stock market went from around 1,000 to 10,000 as well as paying dividends. Gold... a hedge against inflation or a suckers bet? You decide the timing.

Yeah, and the stock market went where in 1929? ( After it was at an all time TOP by the way.)

People have made fortunes off of gold and silver... Yes, even in the Hunt bros times. and lost them too. So your point is what exactly?



Do you honestly think the stock market will just climb into oblivion from here.

BTW the stock market has LOST if you figure in inflation, and it is definitely DOWN as compared to Gold.

MOST people on here have no clue about what money is, or what Gold is used for.

Central banks the world over ( Who are the biggest Gold buyers right now....for a reason) are going to stop their massive gold buying tomorrow I heard, and put the money into the DOW.

It's always good to buy at the top of a market. ( sarcasm)

Can the DOW go up from here? Sure. But it's a suckers bet that it goes up and never stops.

Someone owes 17 trillion that they don't have.


I guess I could sum this up and end it in one more sentence........... If you had money in the bank in Cyprus two weeks ago, would you wish you had gold in your hand instead?

 

[NotMyHome]

I like the idea of having some pm coinage on hand when life gets hard, but here's just a couple of thoughts to consider. I can easily see the value of our dollar dropping to nothing and inflation concurrently soaring – it's already happening now (whatever the Gov claims in its mind-boggling stats).

One problem, though, for planning to use pm coinage, bars, etc. in the future is how to establish the local, daily value of it.

In ancient times, money changers and merchants all had scales to weigh the "give and get" of each transaction. OK, so we all store a scale, but who is going to say that 1oz gold piece will get you one loaf of bread or 1000 loaves, etc.? Will your neighbors be the local market price setter? Many of these same people currently sell (give) their gold/silver to the local "Buy Your Gold Here" places for give-away-prices. If that becomes the local market price competition, then starvation won't be kept away for long, I think.

What about letting the Gov set the price for our ounces of gold? Remember Roosevelt - need I say more? How about that local bank branch box that can be found on every corner to set a price - no comment. In any case, how would that "value" be set for general commerce– in dollars? If so, then better stock up on Zimbabwe wheel barrows.

So, barter, you say. Possible, I agree, but one might also want to store a hack saw along with that scale in order to cut that ounce piece into quarter, tenths, etc. The local farmers' market would sell how many potatoes for a full ounce?

Alternatives? How about learning a skill? Convert that brick barbeque into a forge and buy a few hammers. Buy grazing land and raise mules. Purchase land with a salt lick or an artesian well. Stock up on sulfur, charcoal, and saltpeter with some repacking tools. Find a rich farm-wife and swap some toilet paper. Ok, I'm kidding on that one.

These are just some thoughts and easily might have no value except to me.