Sunday, April 4, 2010

Precious metals on a budget

"Gold is the money of kings. Silver is the money of gentlemen. Barter is the money of peasants. Debt is the money of slaves."

I dabble in precious metals. I have been for a few years now. I wish I would've gotten into them when they were 1/3 the price that they are now but who didn't? I don't have a lot of extra cash to blow so I don't go overboard with them. I just buy a few coins here and there when I have some spare cash. Even if you only drop a few bucks a week you'll be surprised at how fast your stash builds up if you stay consistent. You don't need much disposable income. There are plenty of ways to build up the PM stash without breaking the bank.

The cheapest way to collect precious metals is to look for it in change. It's extremely rare to find junk silver in change these days but every once in a while I still get lucky. Times are tough and a lot of people are breaking open their piggy banks. This leads to a lot of older coins reentering circulation.

Most coins have numismatic value above and beyond the value of the metal that they consist of. You might not care but when you go to sell the person who's interested in buying might. If you're not interested in getting into coin collecting then don't worry too much about the numismatic value. Just learn about what coins are made up of what metals and buy them as close to spot as possible. Keep in mind that spot price is a guideline. If you're not buying in bulk then you'll probably end up paying a premium over spot.

Junk silver is the obvious choice if you're on a budget. Learn a thing or two about coins and you can get some very good deals. My dad is an avid coin collector so I learned how to find junk silver in change a long time ago. Over the years, before I got serious about collecting myself, I had amassed quite a collection. OK so it was more like a small jar of coins but still.... I went out and got some coin books and and started filling them. The cheap ones are just a few bucks each. I also got some plastic coin tubes and some paper rolls. I filled the slots in the book and put the leftover coins in the appropriate tube. Then I found a good coin price guide, made a list of which ones weren't worth much more than spot price and started making weekly visits to the local coin store to fill empty slots. I also buy rolls of "junk silver" and try to find coins I need that way. Now my books are getting full and I find myself buying higher quality coins to fill the slots of low grade coins. I just replace the low grade coin in the book and put it in the plastic tube. When a tube gets full I roll it in a paper roll, stash it away and start filling the plastic tube again.

"Generic" silver bullion that's minted at non government mints can usually be had for very close to spot whether you're buying in bulk or not. Government guaranteed bullion (like silver eagles) usually carries a hefty premium over spot. Numismatic value can also influence the price quite a bit (in some cases a lot). I have some silver eagles. I also have some bullion. The mint ships bulk silver eagles in tubes. The tubes hold 20 silver eagles. It's not such an insurmountable obstacle to get one of those tubes filled. Just buy an eagle or two whenever you can afford it and watch the stack grow. For bullion bars they make silver bar vaults. They work for gold bars, too, but I don't recommend buying gold in any form but government minted coins or bullion. They fill up fast even if you're just adding one bar every couple of weeks.

Swap your extra crap for a more compact store of wealth. Have a garage sale. Put stuff on ebay. Take that money and buy some bullion or junk silver. If you make enough then you could even buy some gold. I recycle cans. When I cash them in I take that money and buy precious metals. The same goes for spare change. I save it all. When I cash in my dimes, quarters and post 1982 pennies the money I get all goes towards pms. My 1982 and older pennies and all of my nickles go into coffee cans. For a while there I had almost convinced myself that it just wasn't worth sorting through everything. Back in 1964 a lot of guys were probably thinking the same thing. Meanwhile, other guys were filling buckets up with every bit of junk silver that they could get their hands on. 20 years later they were happy they did. It's a VERY small investment that will pay off someday.

If the economy does collapse hyperinflation will most likely occur. First we'll have massive deflation where the cost of goods will go up much more quickly than your wages. We're already seeing that slightly now but they're doing a pretty good job of keeping it under control. That's why oil is still under $100 a barrel (although that's starting to creep up again), the stock market keeps going up and precious metals have been staying fairly stable. If they keep interest rates low, the fed keeps buying our tbills and we keep spending ourselves into oblivion, though, hyperinflation will occur. If that happens then the price of everything will go up astronomically as they're forced to flood the economy with dollars. One thing you can count on is that your wages still won't increase as much as the price of goods. Precious metals, on the other hand, will most likely keep up with the market. It sounds unlikely now, but maybe someday that handful of gold coins will pay off your mortgage. Unfortunately, that won't do you much good when it costs you 10 million dollars for a can of beans. Have a means to protect yourself, have a source of clean water and have a stocked pantry before you start putting a lot of money into pms. At least if none of that ever happens; even if they fix everything and we go on to continue to be prosperous I'll still have a kickass coin collection with a lot of history to pass down to my daughter or maybe someday my grandchildren.


ralleywolf said...
This comment has been removed by the author.
ralleywolf said...

Cool article. It made me think of smelting. You can build a forge that runs on waste oil and melt down metal. The mint makes pennies at a loss so even if you melted down pennies for the copper you could still do good. Theres precious metals everywhere... how many people have thrown away used catalytic converters? Each one has a small amount of platinum in it.

The Urban Survivalist said...

Pennies are 97.5% zinc. They're clad in copper. Their melt value is still less than a penny. Any penny minted before 1982 and some during 1982 are 95% copper. Nickels are 75% copper/25% nickel. Through 2010 they're using the same metal content. As of now they're still worth 7.5x face just for the metal content.

A forge isn't enough to get the high value metals out of most industrial/electronic waste. You need specialized equipment and chemicals. You can definitely melt down old pennies with a forge, though. I really don't think that it would be worthwhile. They're still more recognizable and valuable in penny form. Besides, melting down coins is illegal.

As for catalytic converters, anyone who's got the know how to get one off of a car probably knows what it's worth. The metal content reflects a portion of the cost of the part.

The Urban Survivalist said...

Nickels are 1.5x face not 7.5x sorry.

Suburban Survivalist said...

I agree the metals are good as a hedge - prior to collapse. After collapse it might take awhile for gold/silver to be worth much, depending on how hard the collapse is. Still, I think setting back some silver is worth it. My brothers and I have a good bit of coins saved by our grandfather - silver dollars (29x), half dollars (50x plus), and a bunch of quarters and dimes. Several few pounds worth, I think.

Gilbert Chung said...

Nice article. Im not so sure about going into coins but I've been thinking about investing in gold coins. Or gold in general....but moreso in gold coins just in case the US dollar goes to sh!t.

It'll take time though.

Ebony Kleinman said...

I didn't know that there were people collecting coins just for the precious metals inside. I have a small coin collection, but it's mostly because I thought the coins looked cool or I bought them in mint condition. I'm not an avid collector. I just like pretty things! Putting your money into something that holds value over a long period of time is the way to go though.

Blogger said...

With BullionVault you may acquire physical gold and silver bars at current market exchange rates.

Your bullion may be stored in 1 of 5 secure worldwide vaults. And you are able to exchange it online or withdraw physical bars.