We've spoken in the past about our need for a "store of value" as part of preparing for financial hard times. Investopedia defines the term like this:
A store of value is essentially an asset, commodity, or currency that can be saved, retrieved, and exchanged in the future without deteriorating in value. In other words, to enter this category, the item acquired should, over time, either be worth the same or more.
Gold and other metals are stores of value, as their shelf lives are essentially perpetual. For investors, interest-bearing assets such as U.S. Treasury bonds (T-bonds) qualify, too, because they retain their value while generating income.
Milk, on the other hand, is a poor store of value because it will decay and become worthless.
Most of us can't afford to invest a large proportion of our income and/or savings in stores of value, because they aren't really "investments" at all - they don't earn interest, they don't pay dividends, and we lose access to and the daily use of the money we use to buy them. Nevertheless, it's prudent to own at least some stores of value, as a hedge against other investments (including cash, in a high-inflation situation) that may lose value rather than retain it. That's why many people buy silver or gold, in whatever quantity they can afford. In South-East Asia, gold jewelry in particular is an investing way of life for many families, even those who are relatively poor. There have been so many disruptions to society, the economy and stability that they've learned the hard way to have some of their savings in things they can scoop up and carry with them as they flee. Gold jewelry is negotiable for cash almost anywhere.
Francis Porretto reminds us of the value of gold and silver for this purpose.
Since I retired, I’ve been unable to afford much in the way of gold and silver purchases. Nearly all my precious metal was purchased at least ten years ago. Even then, it was a strain to afford it:
Price of gold in 2014: $1266.06 / Troy oz.
Price of silver in 2014: $19.10 / Troy oz.
Things are different today (I hear every mother say):
Price of gold in 2024: $2502.70 / Troy oz.
Price of silver in 2024: $29.33 / Troy oz.
Thus, the dollar cost of both metals on the American precious metals market has increased greatly: by more than 50% in silver’s case, and by almost 100% in gold’s case. These figures don’t mean that gold and silver have become “more valuable;” they indicate that the dollar has become less valuable, measured by its purchasing power. If you’ve been looking for an explanation why the BRICS countries and others are abandoning the dollar as their common reference currency, you have it now.
The precious metals are not investment vehicles. They’re hedges: ways to protect part of one’s savings against inflation ... If you have the means to do so, get started before our American Weimar is upon us. With a federal government that’s deepening our national debt by more than $2 trillion per year, it’s become far more likely than not.
There's more at the link.
Quite apart from the "store of value" aspect, I'd point out that precious metals are almost always immediately negotiable for goods and services. On many occasions in the Third World, where social order had broken down and security for one's person and/or possessions was scarce to non-existent, the ability to hand over a gold or silver coin in exchange for what one needed literally meant the difference between life and death. (No, I'm not exaggerating. It really was like that.) Similarly, after disasters in this country where access to the Internet was lost, cash was king: if you had it, you could buy gasoline or food or water or shelter, but if you depended on checks or credit cards that could not be verified through the banking or credit system, you were SOL. (See my "lessons learned" post after Hurricane Katrina for examples.) Gold and silver coins functioned just as well as paper dollars, if not better, because vendors knew their value and didn't hesitate to accept them as the equivalent of negotiable currency.
I second Mr. Porretto's advice about owning at least some silver and gold, if one can afford it. They're too useful to ignore.
Peter
26 comments:
That is making the very big assumption that the Gov't won't outlaw the ownership of gold & silver and FDR has already demonstrated that. "Illegally owning" gold would get you sent to prison. It happened once, it can happen again as it prevents the Gov't from devaluing the currency.
Steve
Yes, that's a fair point. On the other hand, so is the reality that, according to well-informed estimates, only between a quarter and a third of all gold in private hands was delivered to the government after FDR's proclamation. The rest was retained by its owners, and apparently traded relatively freely between them, too. If such a regulation were to be passed again, I fully expect a similar result. (Silver wasn't confiscated, so it wasn't affected.)
I have some silver and will be getting some more. Gold does have its uses but I am not sure it is worth having, at least at ounce quantities. I have dime, nickels and pennies as well as they where once worth more that now. Could happen again. Any penny minted before 1983 is all copper.
Course the only way they can be turned into needed items is if the person selling the item perceives that they have an excess amount of the item.
Come the collapse, those with gold will find their burden lightened by the first one to pull a gun on them. Lucifer's Hammer and Postman always got that part right.
I always think that I would have to buy a $20 gold piece as that the only one I hear about. So, if I'm buying a pound of hamburger I wouldn't want to chance a person could give me back any portion of it. Obviously I've never bought gold or silver. I did look at a Troy ounce but it's $250/300. So is it better to buy silver for future trade value?
To HMS Defiant, you absolutely correct sir, which is why having the means to protect you store of value is as important as have the store of value. It also means that common calibers of ammunition will also be stores of value along with the tools to use them.
I prefer silver US coins as being the most trust worthy, with only a small percentage of gold coins of less than an ounce.
There is a story out of post WW1 Germany where a waitress was tipped a one ounce gold coin by a group of businessmen and after the inflationary collapse of 1923 she bought the entire restaurant with that coin. The story may be just that but it is the kind of thing that can happen to those with the proper means in time of economic crisis.
Heh... "Things are different today (I hear every mother say)"
I guess picking the "right" date is important. Silver at $30 per ounce is down 45% from 1980 - and yes 40 years is long term. So, ???
In reference to Anonymous' comment above whenever governments attempt to ban ownership of anything compliance is close to nil and the opposite of the stated goals (no one owning or consuming the item) the related ownership and consumption go through the roof. Guesses on compliance to FDR's EO 6102 is at best 30% i.e. much much gold still remained in private hands for decades.
I wonder how valuable a quality multi-tool will become in the future. No matter what state the economy is in, we all have daily tasks to get done that require tools to create and/or fix. Having a small kit that can do a multitude of tasks but can be carried on your person (to me) may become valuable when you cannot carry your tool box everywhere you go. These don't require electricity to function either.
Yes, do not forget your NickyMac:
"Gold will not always get you good soldiers, but good soldiers will always get you gold."
Or as I put it: "My precious metal investments are in brass and lead."
I only see gold and silver as being good once society is stabilized again. During the period of destabilization, I for one would not be accepting gold or silver for anything of real value at the time such as food, clean water, clothing, ammo, etc. because I am unable to verify the authenticity and purity of the precious metals.
Since the times of the Roman empire, an ounce of gold would by first class men's suit or a quality standard infantry weapon. This has varied a bit from time to time, but seems to have held true in the long term. It works well as an inflation hedge.
Also, a fellow with whom I worked for some years only made it to the US, because his father had some gold buried under that house that they could use to pay for their passage out of Vietnam around the time of the collapse.
Peter, after FDR (hwack-ptooie) outlawed ownership of gold and silver bullion and bars, yes, only about a third of the available was turned in for FedBucks and lots were freely trafficked.
But that was then. This is now. With a fully weaponized surveillance and lawfare state (do you trust safety deposit boxes anymore?,) private ownership of non-jewelry gold and silver is a dangerous thing.
The Locals, Staties and Feds already know what pawn shops buy, sell and trade. They already know what metal sellers and traders do. All transactions are recorded and reported and imminently searchable by said authorities. And if you use anything other than cash, well, your banking institution (or credit union) will nark on you.
Jewelry is the key. So far most jewelry sales aren't tracked like pawn shops or metal suppliers. Yet.
And 'wearable money' has always been a thing. Just make sure you don't actually wear it, as flashy will attract attention.
Buy in small lots from different jewelry stores. Yes, you'll lose 50% or more of the value of the jewelry if you sell it just for the metal content, but it's the only way.
Wouldn't be surprised if the LEOs and IRS aren't working to track jewelry purchases under $9K.
Gold (PM's) is a hedge of value. It assumes a Rule Of Law of sorts as to prevent the "Pulled a Gun" on you scenario.
In the Mad Max style scenario where firepower rules the streets (Haiti anyone) there is no trade, indeed being known as wealthy (meaning you eat 3 meals a day in Haiti) means kidnapping is possible.
Even in Haiti there is a sort of rule by warlord society, keeping some primitive barter economy going.
But it's ugly.
If you don't have trusted friends and trusted family to work together even a small-time hood with a few buddies will be a real hazard to you and yours.
Collapse has happened many times before and people survived and rebuilt. The Robber Barons castles on the Rhine River show the advanced Warlord rule of law.
I do concerns about my grandchildren. Like white people in South Africa today. Or Once Rhodesia.
Of course, that works both ways. The person with the gold or silver can have guns, too, and thinking of marketplace as well armed people taking care of their needs by trading things they have is a good starting point.
With the current price of silver, an early 1960s dime is worth about $2 in today's inflated (devalued) currency. After the collapse, people will negotiate what the perceived values are. It will take time.
1979 and part of 1980 the Hunt brothers tried to corner the silver market. March of 79 Silver was $7.40.
March of 80 $35.50.
March of 81 $12.15.
Skip ahead to March of 91$4.00 March of 24 $29.50. It has had a steady increase for 35 years. It's has gone up and down but only by a few dollars and has continued to climb. Silver is not the stock market. It's more of a hedge against the stockmarket. I look at like having a small revolver in my coat pocket as a backup to my Glock.
How do you get gold and silver without being tracked ? Just buy jewelry ?
How do you tell what is real gold and real silver in the apocalypse ?
As a poor man, my only stores are silver, in pre-'64 US coinage. It has the advantage over bullion of being currency, with known values and no need to assay purity, as might be needed with bars of metal. Plus it's easily divisible with dimes, quarters, half and full dollar coinage.... YMMV.
A store of value is not an investment, it's insurance.
When the govt outlawed gold, Jewelry was exempt.
I bought a $5 US gold piece so they have coins less than a $20.
Responding to the "cash is king" in times of "normal" disasters, instead of a pile of $100s, $50s, and $20s always keep a quantity of smaller bills and even change. Otherwise that emergency quart of milk for the baby might cost you $20.
> Quite apart from the "store of value" aspect, I'd point out that precious metals are almost always immediately negotiable for goods and services.
that may work for some things (I would say large ticket things and lifesaving bribes/payments), but try walking in to a grocery store and pay for something with gold.
Tim Powers' SF novel "Dinner at Deviant's Palace" had a rather interesting take on store-of-value: the State reserved a monopoly on potable alcohol, and backed their currency with it. So State whiskey had both fiat and inherent value; you could buy things with it, or you could drink it. And it would keep indefinitely if not used.
Yeah, it was just backstory for a novel, but no crazier than cows, giant stone wheels, chickens, cowrie shells, blocks of tea, measures of wheat, or beaver pelts, which have all been used as money at one time or another.
My thoughts, …
https://prepperstta.blogspot.com/2013/02/chapter-thirteen-financial_2.html?m=1
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