The logic for buying gold/silver?

[Mike7.62]

As I said in a previous post, small denominations of pre 1965 US silver coins or pre 1933 US gold $5 or $10 coins are one way, or using the "pieces of eight" method common in colonial America is another way in which you may get smaller amounts of metals for transactions. That and a powder scale. PM's are measured in Troy as are powder scales.

As an aside, by US law-specifically the Mint Act of 1794, one US Dollar is actually a specified weight of 416 gr total, of which 371.25 is pure silver, the rest copper. The paper FR note in your wallet is actually a debt instrument payable only in the assets of the Fed, which is more debt paper. Silver certificates were declared null after 1965, and gold certificates were null after 1933.

IRT supply and demand curves, that is usually dependent upon the market for a particular good or service. The more difficult or scarce, the higher the amount of whatever is being used to transact the exchange. The amount that you will have to pay in either silver or gold will be up to the parties involved, but you can use past costs as a rough guideline. Again, that will depend upon scarcity and demand. Ammunition is a very good example of that dynamic in action.

edited to add, past pricing is a good indicator of relative prices. For example, in 1963 a gallon of gasoline was around .20 to .25 cents. That was either two silver dimes or one silver quarter. At current spot silver pricing that would make the dimes worth $2.03 each in today's paper money. Two of those equals a gallon of gasoline in most markets today, more or less depending upon region.

 

[DJINCO]

What about food as a hedge against inflation?

I see food prices going up very quickly.

 

[Mike7.62]

Absolutely true. Not just against inflation, but against all types of calamities such as natural disasters, job loss etc.

 

[Mule Packer]

They say hindsight is 20/20. If that's the case, we don't have to look too far back to the Great Depression and see what happened there.

During the Depression, my father-in-law was one of 11 kids. They lived on a 13-acre farm. They had a little money when the Depression hit and, fortunately, were able to pay off the farm. On part of their farm, they raised sugar beets every year as their "tax crop" to pay off the annual taxes.

The rest of the farm was used for growing food, raising chickens, a couple of pigs, and two dairy cows.

As my father-in-law told me, "Our clothes were patched, but all the kids in my school had patched clothes. Our shoes had holes in them, but all the kids in my school had shoes with holes. But, because of our garden and animals, we never went hungry...and not all the kids in my school could say that."

He told me that story in passing one day, but I was fortunate enough to pick up on the subtle lesson he was trying to get across. Since that time, I've always put in a good-sized garden each year. I also have some fruit trees, berry bushes, and a small flock of laying hens.

Don't get me wrong, it's always good to have some cash on hand (whether it be gold, silver, or what have you), but when push-comes-to-shove, a bowlful of Krugerrands won't be nearly as satisfying as a plateful of meat and potatoes.

Also, as a side note...bartering was big during the Depression. I've already started. My neighbor has bees and markets the honey. My chickens produce more eggs than we need, so he and I swap...eggs for honey. You can't beat that.

 

[BJoe]

Thanks for the comments.

So in general I had it right. Metal is good for holding value not gaining it. I have not really invested in metals much (other than a bunch of lead and copper) so I will keep watching and learning.

#1 YOU take control of it. Almost all the big dealers will do you a favor by holding YOUR gold. or silver, for you at no cost. INSIST on it being sent to you.

#2 Don't over look e-bay. You can buy 1 ounce silver rounds, or bars, for less than $40 each delivered to you. Check shipping charges, some people/dealers knock you out with them.

#3 As with stocks, or Mutual Funds, dollar cost average.Set a amount, $25, $50, $100, and buy that same amount each month.

 

[mtgianni]

I see an advantage of buying gold or silver. I do not see the same advantage in buying paper that says you own gold and silver.

 

[Frank46]

I would suggest getting only dimes,quarters,half dollars and silver dollars
for a medium of exchange. There are many coin dealers who sell the 90% silver coins in rolls. AKA junk silver. And as far as buying paper money forget it as its only as good as the gov't says it is. Just for grins and giggles when was the last time when an inventore of our gold reserves was done and publicly disemanated?. Frank

 

[Mike7.62]

1954, under Eisenhower. The BS "inventory" that took place in 7974 was for show, and not done by an independent third party, so that doesn't count.

It's taking the Fed seven years to deliver a small (300T) portion of the gold that they supposedly hold for Germany in their vaults in NYC. The reality is that it isn't there and has been leased into the market, and they're scrambling to get enough of it back to make good on their obligations. That doesn't bode well for the 8200 tonnes that the US supposedly owns in Ft. Knox, West Point and the NY Federal reserve Bank. It also doesn't bode well for us as a country if we don't have the gold that we're supposed to if/when we have a currency crisis. IMO, we'll be finding out about this the hard way in about 12-15 months.

 

[ChattanoogaPhil]

You're right, KJM, central banks have been net buyers of gold for the past couple years. Headlines told us that it's the biggest increase in 50 years after 20 years of net selling. TIME TO BUY GOLD!!! Was it? Interesting as it were, today's prices are pretty much where they were from the beginning of this reported mad gold rush by central banks. About the worst performing period (with a nice peak) for gold in the past decade.

Of course 'central bank' sounds impressive to the average guy, but who are these central banks? Well... according to UBS for the first two months of 2013 central banks bought about 50 metric tons of gold. Russia and S Korea account for about 40 tons. Other notable actors were Kazakhstan, Indonesia and Azerbaijan (China we don't know). Prices fell. Goldman and Citi had both predicted mild gains in 2013 and falling prices in 2014. We'll see.

You asked my point on my previous post. My point was that folks should not wander into gold with the notion it will necessarily protect their purchasing power during a given period. Sometimes not even during a quarter century where consumer prices more than doubled, stock market went 10x, as gold remained unchanged.

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

Interesting way to ask a question.

I kinda like the forward view of the 'shale gas revolution'. I look forward to more predictable energy prices, global economic growth, growth in stocks and gold prices drifting.

Good luck.

 

[NotMyHome]

Ok, let's agree that all of us are smart enough to recognize what is happening to the dollar's trending (non)value and are logically planning ahead by buying gold, silver, and/or "90% coinage". Great!

But now, just for giggles, let's take our collective prescience a step farther down that road and think about how we will actually use our knowledge and stockpile of precious metals a few days after the shtf. Let's assume that that event actually occurs unexpectedly next Friday when after the markets close, the announcement is made that the USA has been declared "bankrupt" and its $US is no longer valid for market transactions.

Ah! You say, "Now I can take my two dimes and a nickel out of my "90%" bag and go buy a gallon of gas which for the sake of this discussion has a price that is correctly in accordance with daily melt values of such coins.

I then offer those coins to my local minute market operator and request a gallon of his gas. Unfortunately, the operator is typical in my neighborhood and speaks better Guatemalan than my version of English, so he refers me to a part-time worker who was born and educated in the US. Unfortunately, that person can't even figure simple change let alone convert my melt values to the price that is posted on the pumps (which btw is now in Yuan instead of dollars).

The operator then begs me to use my credit card for the transaction, and to my relief the transaction somehow is accepted.

But wait. How will I pay the bill when it comes? Do I mail a roll of coins that comes closest to the amount of the bill and then take a sharp fingernail clipper to one of my "Buffalo's" to make up the difference? Of course, given more time, pm's will be accepted by banks (for a fee of course) and debit cards might handle the daily conversion rates (for a fee of course) and did I mention the tax forms due on that transaction for the gain in value in that coinage, bar, etc..?

I've had some fun with this and I expect that some of you to try to box me around the ears. Hopefully, none of this will come to pass. Still, it's food for thought…

 

[A10]

A good friend has recommended buying land, guns, and Harleys. He's never lost a dime on any of them! Of course, he hasn't tried to sell his land yet......

 

[Mike7.62]

Making some pretty big assumptions there. First one is that the banks, ATM's, credit/debit cards etc will be open/work. They didn't for two weeks in Cypress, and that was one tiny country tied to the Euro. If the FRN$ does crash, I'm pretty sure that the banking system will be down worldwide for a fairly long while-say 4-6 months-until they, meaning .gov, the Fed, BIS, etc., come up with a replacement system. Even if they have one in place awaiting activation, it will take some time to implement, and will not be seamless or smooth.

The second assumption is that when this occurs that the supply chain will remain intact and there will actually be stuff to purchase from the local Guatemalan "stop and rob" after three or four days. Good luck with that, especially as most stores only have 3 days of inventory and no warehousing. If "it" occurs and the price of diesel goes through the roof, and replacement costs are higher than the current purchase price, most truckers will not be able to make enough money to earn a profit, and will likely refuse to attempt deliveries. Of course I'm sure that .gov in its infinite wisdom will repeat Nixon's wage and price controls and again that will result in shortages, also disrupting the supply chain.

What will happen short term is that cash, meaning actual physical paper FRN$'s will increase in purchasing power and be used until they too are no longer accepted as people finally tumble to the fact that they are trading scarce real goods for paper, and will probably refuse to do so in the future.

Then it is "Welcome to Bartertown". Once that point is reached and proves to be unwieldy, as it usually does, then that will be the time that silver etc. will be used to facilitate trade, and the market, be it black, grey, or otherwise, will shake out the various values that are placed for that trade.

Once the new monetary system is in place, if people have confidence that it is viable, which more than likely means it has some type of physical backing, then you may either trade physical for currency at your local coin shop or online auction site, and do business that way, or if we are once again on a PM coin standard, exchange your PM's for the current coins in use. I'd guess that if the latter happens that the old style coins/bullion will be accepted right along with the new, just adjusted based upon content.

That's how I think things could shake out when the FRN$ paradigm is finally over. Of course it's just rank speculation, but the advantage of having real physical bullion and coins is that you're ready for any eventuality, and if none of it happens, at least you will still be able to sell the metals for something, or pass it along to future generations. It's insurance against catastrophe, which judging by events in the world and the ignorati who lead it, will happen at some point in time. It always does.

 

[Coldshooter]

There's gold, and it's haunting and haunting;
It's luring me on as of old;
Yet it isn't the gold that I'm wanting
So much as just finding the gold.
It's the great, big, broad land 'way up yonder,
It's the forests where silence has lease;
It's the beauty that thrills me with wonder,
It's the stillness that fills me with peace.


Robert William Service
Spell of the Yukon

 

[walnutred]

I just don't see PMs being that fluid where I live. In a real SHTF situation I also can't help but feel developing a reputation for trading in PMs will open you up to long range sniping.

 

[NotMyHome]

Actually, in my previous post, my biggest assumption was in thinking that the Fed won't quickly be taking charge of the situation.

First, an announcement will be made that it is all just a misunderstanding that was caused by the fact that all denominations of US currency look like Monopoly money. Henceforth, Parker Bros. will cease and desist in printing its counterfeit dollars.

Secondly, all rumors that there is nothing golden actually in our vaults are hereby officially declared to be false. Upon request, photographs of our newly installed 3d printing presses which are hard at work turning out "gold bricks" will be made available to the media.

Move on, nothing to see here.

 

[Mike7.62]

You mean like these printers?

https://www.youtube.com/watch?v=j2AvU2cfXRk

 

[therevjay]

The advantage to gold and silver of course is that they are always worth SOMETHING. Stocks, bonds, and paper money are just that, paper.

In a real SHTF situation I think silver coins woud be of more practical use then gold. But the truth is in a real SHTF situation, someone (Govt. or bandito) would probably take them away from me anyway.

 

[BJoe]

I just don't see PMs being that fluid where I live. In a real SHTF situation I also can't help but feel developing a reputation for trading in PMs will open you up to long range sniping.

I think you need to separate SHTF from Mad Max. They are not inclusive.

Bob

 

[NotMyHome]

You've got the right idea but expand it with this and picture the production of "gold bricks" :
3D printer in action making real 3D models - can make shoes, guns - anything! - YouTube

 

[Mike7.62]

Only if they can find some tungsten to use for the core.