Saturday, September 27, 2008

Silver and gold in SHTF

Sorry I haven't posted in a while. I've been busy with the garden, work, etc. It took a sprained foot to get me to sit down long enough to make a post. I was walking barefoot to the car last night, stepped on a rock and my foot slipped off of the sidewalk and rolled into the grass. It's not bad. I didn't even bother going to the doctor. Why bother when I had the same stuff to treat it that the doctor would have given me (minus the expensive x-rays of course)? It's just swollen and I can't put much weight on it. If it's still bad in a few days then I'll go get it checked out but it feels a lot better even since this morning. As far as real preps go I bought a canner a few days ago and have been experimenting with that. I canned some pickles the other day and I made some cucumber relish today. I'm probably going to can some green tomatoes pretty soon since it's going to freeze before all of my tomatoes get ripe enough to pick. I wish that more than one green bean plant would have survived and started producing. I was looking forward to canning up some of those. I found a dutch oven at a thrift store the other day for $4. The lid is too big for the pot but it does sit flush on top of it so it should work. I've been taking advantage of the silver and gold dip as much as I can which leads me to the post that I had in mind.

With all of the economic turmoil in the news there's been a lot buzz about gold and silver once again. I'm still trying to figure out why it hasn't shot up through the roof. Try and buy a gold eagle right now on ebay or at a local dealer and you'll probably pay 10-20% over spot at the very least. Since I don't have the money to spend on gold I've just been sticking to silver bars and junk silver. I have been thinking hard about buying some 1 gram gold bars and 1/10 ounce gold eagles since I can see gold being much more liquid in the case of an economic collapse. As far as I'm concerned silver is just "poor man's gold". It'll pay to have some but if you want to get serious about pms then you definitely need to have a good stash of gold. If you've got a ton of silver that you've been collecting over the years then it might be wise to trade some of it up to gold.

This leads me to another point that Ryan over at TSLRF mentioned a day or two ago. How much do you need for it to be worthwhile? Like any other prep some is better than none. You could spend $50 on a 50lb bag of rice and a 25lb bag of pinto beans that you just tuck away in your pantry and forget about and you'll be better off than 90% of the population. Even if all you do is save the junk silver that you find in change it might be enough to feed your family for an extra week or so when the credit card machines get shut off, the banks start closing and you have to wait for your FDIC check. In the case of hyperinflation, where a wheelbarrow full of cash barely buys a loaf of bread, you might be able to sell that handful of silver change for enough to feed your family for a week. Meanwhile, that stash of cash that you have on hand to pay your bills for a month might not even be enough to buy anything worthwhile. Rule #1 about precious metals investing: over time PMs hold their value. They're never worth nothing and they're not necessarily great investments (unless you started buying several years ago when they were horrendously undervalued...if only I'd known what I do now). So how much is enough?

It's hard to say how much is "enough". If you've got a lot of disposable income and your preps are otherwise squared away then right now is as good a time to buy as you'll see anytime soon. If things don't get better and the government doesn't find a way to fix the mess we're in then everyone is going to wish that they had more PMs. You've just got to hedge your bets and come up with a happy medium that ensures that you're not hung out to dry if things don't go the way that you thought they would. Keep in mind that the government doesn't really have to fix anything properly. They just have to convince the majority that they did and restore confidence. Confidence and energy are the two most important aspects of our economy. We've still got enough energy to get by and if they manage to restore confidence then it'll just mean that we have more time before we run out of energy and everything really does go to shit.

You definitely don't want to buy more than you can afford. PMs are the LAST thing that you want to concentrate on in regards to preps. Once you're reasonably comfortable with the rest of your preps then it's time to start buying PMs. Things are uncertain right now. If you save a certain amount of money every month then right now would be a good time to spend that money on silver or gold rather than putting it in the bank or investing in the stock market. I've considered taking all of my money out of the stock market and turning it into gold. The dividends on the stock that I have left are very good and the company that I'm vested in is rock solid, though. I even toyed with the idea of liquidating my 401k to buy some gold and silver. Things haven't gotten bad enough for me to consider that a wise move yet, though, because of all of the penalties involved. I could take it all out and buy a bunch of gold but what if things do turn around? I'll tell you what will happen. Gold will once again make a correction and be worth a lot less than what I spent my savings paying for and at the same time the stock that I used to have will shoot right back up. I'm not a gambling man. If things don't get fixed then you can bet that gold and silver will go through the roof. If the government does figure out a way to fix everything then they'll probably drop right back down to "normal" levels. Then I'll just wait patiently until I see another downturn coming and I'll dump my stock when it's high and buy a ton of PM while it's still low. At this point I'm just watching the market closely. I'm prepared to act fast to dump my stock and run to the coin store or ebay asap if I see something that I deem as bad enough to act happen.

So the government doesn't come through. The stock market crashes. Inflation goes through the roof. While everyone else stands in the checkout lines begging for a gallon of milk or a box of cereal that they can't afford you confidently walk the aisles picking up what you need with a pocket full of silver that everyone is obviously desperate to get since it's shot up to $200 an ounce. The cashier finishes ringing you up and tells you what you owe. You smugly reach into your pocket and count out what you owe based on the spot price of silver. When you try to hand it to the cashier she just gives you a stupid look and refuses to sell you anything. Outraged you fight with the cashier and demand to see the manager. That doesn't go any better so you angrily storm out of the store with none of the products that you need. This is probably going to be the scene if you ever try to walk into a store and buy anything with PMs no matter how bad things get. If the stores are still open then cash is still king. Before you go running to the store you'll have to take your PMs to the local dealer and get cash for them before you can expect to do business with the average person. Eventually some enterprising individuals might start accepting PMs as payment but you can't expect that to be the norm. Also, it'll get to the point where how much you get for what you're trying to sell will be based more on what you and the person buying deems it to be worth than how much the "spot price" happens to be that day.

If the stores are still open then it's not a complete collapse. If things get so bad that the country is a warzone, the stores are shut down and people are raiding their neighbors for what they need to survive then having PMs won't do you a bit of good. Eventually society will start to reestablish itself, though, and if you manage to survive that long then gold and silver will be the first store of wealth that people start accepting as payment (besides practical trade items like food, ammo or comfort items). Do you really want to lug all of those cans of coffee or bags of beans to the local trading post? Ammo might be worth a lot but you never know when the guy that you just traded it to might decide to give it back to you from the barrel of his gun because he thinks that he'll be able to get everything else that you have.


theotherryan said...

I was writing a comment and at some point it got big enough that it is going to be my morning post. Of course you will get some linkage action.

Staying Alive said...

I was happy to see that you had posted to your blog. I just hope you are aware that you can't eat precious metals, you can't shoot precious metals, and you can't bind a wound with precious metals. As far as trading smmo for anything, I have been against it from the first time I took a look at it and my reasoning was the same as your: They can shoot it back at you! Good point as far as I am concerned.


The Urban Survivalist said...

Well I did mention that you shouldn't even think about "investing" in PMs until you have all of your other preps squared away. I agree that you can't eat gold but it'll always be worth something. Even if things get really bad and it doesn't look like they'll get better during your lifetime you'll likely find someone, eventually who's got something you need and just can't resist that shiny glitter of a handful of gold coins.

Bill in NC said...

"if you manage to survive that long then gold and silver will be the first store of wealth that people start accepting as payment"

Sure, but as Gary North has shown (from history), markets break down and become very inefficient.

He cites examples such as in the Austrian hyperinflation where aristocrats in the city were trading their family heirlooms for a few sacks of potatoes.

If things get so bad that people are only willing to accept gold & silver, a 50lb. bag of rice that now costs $25 at Costco could then trade for 10x that amount.

I'd rather have the rice (in mylar-lined Superpails, with O2 absorbers added) bought at today's price. said...

Interesting points. Metals may be difficult to trade simply because most people think in terms of today's currency. Gold and silver seem exotic to most.

kookster said...

The reason gold and silver aren't going through the roof is because there are very big investors who trade them on the futures market. When the stock market goes up they will sell their silver ETF shares and buy regular stocks. This drives the price down. But the demand for physical is still there. This is causing a HUGE disconnect in price between "paper silver" and physical silver.

sth_txs said...

Purchasing gold or silver is something one should have finished doing 2 or 3 years ago.

I'm now focusing on preps.

The Urban Survivalist said...

Bill, I agree that if things get really bad and we have to start relying on silver and gold as forms of money that you won't be able to get on a website, get a price for it and find someone willing to value it at that amount. The same will go for things like bags of rice and boxes of ammo, though. Something is only worth what someone is willing to pay for it. The single mom down the street that can barely afford to keep beans and rice on the table for her kids isn't going to place much value in gold or silver unless she knows that it can be used to buy food for her kids. Not everyone is going to be in that situation, though. There will be people that are better off than others. You can only fit so many bags of rice or buckets of beans in your basement before you decide that it's time to start consolidating some of that wealth. With that being said, take care off our other preps before you start dumping a lot into precious metals.

The economy melts down? We start having trouble importing oil? The grocery store shelves aren't always full? People are losing their jobs left and right? You can bet that gold and silver will be invaluable in this situation. Yellowstone erupts? Millions of people die? The atmosphere is so inundated with ash that no one knows when we'll be able to start growing crops again? Another ice age is inevitable? Gold and silver aint gonna be worth much for a really long time.

Anonymous said...

Do NOT invest in gold or silver ingots of any weight. No one will have assay equipment/chemicals to determine the authenticity of your precious metals, instead, invest in common coins like junk silver, gold eagles, Kruggerands and the like (much more diifficult to forge).

rupinder said...

Know the weight and purity of your gold. Scrap gold buyers will pay you according to the amount of pure gold that you have.

Sell gold for cash

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