Silver and Precious Metals – Things to Think About
So, it’s the end of the world – you’ve got you bullets and beans, and you’ve stocked up on gold and silver to trade with your fellow survivors of the apocalypse. You’re set, right?
Well, let’s take a look at that. A popular piece of advice is to have precious metals on hand when society breaks down because they’re universally recognized as having value (i.e., precious metals). The thing is, does that really ring true? Here’s some things to consider before going all in on precious metals:
1. Precious metals are a hedge against inflation. This is a relatively accurate statement, because unlike the dollar, PMs will always have value. Generally, as the dollar gets weaker, PMs tend to get stronger, meaning their value goes up. But as a hedge against inflation, you must remember that their value only goes up against the dollar – so technically, yes, they are worth more, but they’re worth more in the very currency you’re trying to protect yourself from. So, if you buy PMs cheap, and sell when the dollar is depressed, you’re going to make a profit – but keep in mind, in selling, you’re showing some amount of faith in the dollar, and planning on it going back up again. If that doesn’t happen, you could be stuck with dollars that are worth less than they were when you traded them for your precious metals.
I’m not a man who likes playing the markets, so I don’t partake in PMs trading. The element of risk just isn’t worth it to me, and it honestly takes a lot of work. If you’re a day trader, well, trading in PMs may be for you.
2. Gold is great for the collapse of society. Uh, kind of. Here’s the problem – if the dollar collapses, gold prices are going to soar. Why is that a problem? Well, try buying groceries with a krugerrand – unless you’re buying a lot of groceries, 1 ounce of gold is going to be difficult to trade. Gold can be a great idea for making large purchases, but it’s lacking in small item buying power.
3. Silver will become the de facto trading currency. This is a statement that I lean towards – silver is small, portable, and isn’t as valuable as gold, meaning you can spend it in small enough denominations that it’s actually going to be spendable. It can be easily obtained in bars, coins, and even in flats small enough to fit in the credit card slot of your wallet. The silver spot price, as of today, is $20.50 an ounce – so, going by my last grocery bill, I should be able to buy groceries for about 5 ounces of silver at today’s price.
The big problem, as I see it, at least at the beginning of a monetary crisis, is acceptance. We here at Lodestone will take precious metals in exchange for training now, but there’s not really a wide acceptance, or even a wide knowledge, of how to accept precious metals.
The problem will be convincing the vendor you wish to buy something from that yes, this is genuine silver, or yes, this quarter is worth more than twenty-five cents. It’s not widely known that an ounce of old, pre-1964 silver coins is about an ounce of silver, so expect that to present a problem.
Let’s talk about what I think is going to be the easiest form of silver to use in a long emergency – junk silver. Junk silver, by definition, is simply old coins that were minted before 1964, and are around 90% pure. Generally, $1.40 to $1.60 face value of junk silver equates to about a full ounce of silver – the range comes from age and use. The more those coins have circulated, the more silver they lose just through use – it literally has been eroded from the coin. Junk silver has a couple of things going for it:
1. It’s not really collectible, if you’re careful what you purchase. Rather than purchase Morgan dollars, look for Roosevelt dimes and Washington quarters – these are basically what’s in circulation now, except that pre-1964 they were 90% pure silver.
2. Everybody recognizes them and is more apt to accept them as payment. A silver Maple Leaf may be a harder sell to the attendant at the gas station than a handful of Roosevelt dimes and Washington quarters.
3. You may get some back in change! It’s rare, but every now and then a few silver coins slip into my change, and I’m always happy to see them.
4. Unlike bullion, it’s recognized tender – see above. You can whip out a credit card sized ounce of silver bullion from your wallet, but I have no way to test whether that’s real silver or not.
Now, don’t go out and convert your 401k into junk silver – or any precious metal, for that matter. The market is volatile and controlled by people and businesses with far more money than I can dream of – the little guy always loses.
However, keeping a few ounces of gold, and a few hundred dollars face value of junk silver around is a good bet for the future. Junk silver is easy to buy – I generally get mine from www.providentmetals.com – and is pretty safe to ship via the post office. Buy a little at a time, whatever you can afford, and don’t get discouraged if you purchase comes to a couple of quarters and a few dimes. It all adds up. Gold can be more of a stretch for a lot of people (myself included) at the current spot price of $1,840 an ounce, but there are minted coins available of incremental values available – say 1/3 of an ounce, or ½ an ounce. These can be easier ways to start building up a gold stash, and at the same time, be easier to spend because of their lesser value.
There you have it – a quick and dirty introduction to the world of purchasing precious metals with a mind towards insulating yourself from economic turmoil. Again – don’t sink your entire 401k into it, because that can leave you with less money than you started with. Be careful, as always, and don’t spend your life savings, and you can be comfortably insulated from economic hardship.
Kirk