Saturday, January 28, 2006


Should Precious Metals Be Held Physically?

A reader raised this topic for discussion. "Is it necessary to have physical possession of gold for ultimate safety?"

Another added, "I know I am old fashioned when it comes to this point. I think one should most certainly hold some gold & silver in physical form. There are those who will pop-up and talk about safety and storage. I've held Au&Ag for years it's not been a problem for me. No one knows what you have unless you tell them. I also think a person should hold on to some cash."

"In the event of an emergencey good luck with electronic money. Ask anyone who has been through a hurricane, tornado, earthquake etc. What a seller of goods & services will accept as payment when the electricity is off. It's best to look at precious metals as an insurance policy, in the event of an economic storm. There are some mighty dark clouds on the horizon. I'm no doom & gloomer, but as the old saying goes it is better to be safe than sorry."

This is a very important issue. IMO, the unpredictable nature of an economic or natural disaster makes physical gold a neccesity. As the second reader pointed out, just don't tell anyone, and most of your security worries are fixed.

It also is an issue with the gold and silver question. I'm all for speculating in silver and have made more profit from it than gold. But silver is bulky compared to gold and it isn't as resistant to poor conditions. The ability to toss a bag of silver coins in a basement corner without worrying that the finish will be tarnished is a similar consideration.

Ron Paul once suggested that gold coins be kept in various sizes; ounces and smaller. This is because when you are actually making purchases with your gold in a crisis situation, you don't want to be forced to cut an ounce coin in half, etc. He also recommended that banks couldn't be trusted, and I agree. If you've ever had a safe deposit box, you know they watch you like a hawk. In an emergency, I think they just wouldn't show up for work.
Should Precious Metals Be Held Physically?

YES!!!! you should buy and hold some like you would milk and bread before a big snowstorm.
(But silver is bulky compared to gold)

I would say it's bulky in part because it's so cheap compared to gold. the gold/silver ratio is WAY out of whack. I remember being hesitant to buy silver at $4.25, I waited until it was around $6 to buy. it's less bulky the higher the price goes!!

I think a strategy is to hold all sorts of gold and silver. buy some in 1 ounce, 10 ounce, 100 ounce and etc. a bag of silver is probably pretty good, during a time of emergency/high inflation, it's probably better to have small denominations. right now I only hold 1 ounce silver rounds. if I were rich I'd probably hold some 1000 ounce bars.
I'm think maybe I should pick up some silver dimes, nickels and quarters. in an inflationary spiral it may be better to have smaller denominations because they might not be able to break change for a silver eagle with something I'd want to hold. in an inflationary spiral a silver eagle could be worth $50+. silver dimes and quarters might be best for small purchases.
by the way, this website is good to show you the intrinsic value of what coins are worth from different years. it's updated all the time to current prices.
(I tend to think in a crisis situation I would much rather have that than a bag of coins.)

how about both? diversify!
(If there is such a crisis that fiat money becomes worthless, then no one will exchange food or other staples for shiny bits of metal.)

yes they will, they are far from shiny bits of metal. they are gold and silver, they've been money for thousands of years. if you want to barter, it's much eassier to trade a coin with a set weight and size than it is to carry around whiskey bottles or 2X4's. the divisibility is why it's been around for so long and is(was) money.

after hurricane katrina(within days) I saw someone who used bottles of beer to barter and another person used a big huge tire. it's a lot easier to carry around gold and silver coins.

besides, WE USE SHINY COINS EVERYDAY! have you ever received change at a store?
we're dumber now though, we accept change who's face value is less than that the underlying metal. our forebears were more educated about money than we were.

(People on forums such as this one like to rail about the evils of inflation, but moderate inflation is actually a good thing. It is a grease that keeps the economy running smoothly.

If there were zero inflation people could hoard their money under their mattress or in a hole in their backyard. With moderate inflation people are forced to invest. Less capital investment, less growth.)

1. moderate inflation is just a dream/scam advanced by the economists and central bankers and those who benefit from "moderate" inflation- the banks and financial industry.

2. "hoarding" money would constrain the fractional reserve system so they couldn't make money out of nothing and make our currency inflate away.

3. the US, and the world, was on a metal standard during the entire process of the INDUSTRIAL REVOLUTION. sound money actually makes the economic system more stable, not less stable. moderate inflation distorts the real economy. earlier periods of growth on a gold/silver standard were better than they are now.

they can't create moderate inflation under a fiat standard.
(Really? Then how do you explain the series of depressions that racked the U.S. during that time? Before we started Keynesian monetary policy after WWII, we suffered eight depressions in the previous century and half. After WWII, we suffered zero.

Fiat money is a great technological achievement of human society. It gives us the ability to tweak the economy, fight inflation, unemployment, etc. It can certainly be abused, but that's no reason to go back to using wampum.)

fiat money has been an absolute disaster all over the world. they can't control the economy. they created the biggest bubble in financial history which we are seeing unwind. inflation have been rampant for years and silently steals money.

I think what has happened now is that we call depressions recessions. to say they've gone away is not true.

wampum is a good example. wampum used to be accepted as money because it's supply was sort of inelastic. you had to make it by hand. as soon as a machine was made that made wampum easy to make it became worthless.

the simple fact is, the whole world industrialized on the gold standard. the only thing the gold standard inhibits is the creation of money out of nothing.
(And it would create instant deflation.)

(You can think that, but you would be wrong. This is not simply a redefinition of what constitutes a depression. The 19th century was wracked by severe boom bust cycles. It was hardly the picture of sound money and stable economics that you portray it to be. It was the exact opposite.)

and the 20th century hasn't been? the 1970s were the longest sustained decade of inflation in US history. stocks were down more than 70% that was right about the time when silver was taken out of coins and we defaulted on our agreements to exhange dollars for gold. the 1987 crash was the worst since the GD. the value of a dollar has value a lot during the 20th century. we've lost much of our industrial base. we're sitting on the largest financial bubble since the 1920's, maybe even the largest bubble in our countries history.
Of course there are worse case scenarios and prudent people should include them in their plans. As far as gold not being useful in a 'Mad Max' situation, I have long advocated investing in gunpowder and lead surrounded by brass.

Physical possession of PMs is psychologically in line with storing cash, food, water & weapons. The idea is being prepared for any eventuality, especially knowing how typical humans react under crises situations (i.e., very badly). That leads to two conclusions...

1) You will not be adequately prepared unless you have PMs in your possession (thus I suspect you do).

2) Anyone on this blog that does have PMs is no doubt equally or better armed, and attempting to rob them will quickly put a permanent end to all of your worldly problems.
Post a Comment

<< Home

This page is powered by Blogger. Isn't yours?