Today we present another article in our non-fiction writing contest–Penrod
I am not an expert on precious metals nor an investment adviser, but in researching the topic I have come across some useful articles. If you are interested in the topic, I am including links to some I found worthwhile. There are a lot more out there, and I hope readers will contribute links to some.
I like junk silver US coins, US Silver Eagles, and one ounce US gold bullion coins, the latter two generally bought from major dealers who buy direct from distributors. That minimizes the chances of fakes…so long as the dealers are honest about where they get their inventory. You can look for reviews of dealers online, and Googling a company name plus the word ‘scam’ may find something negative. None of the dealers will be 100% perfect: what counts is how they deal with dissatisfied customers.
To my mind, silver and gold have related but different purposes. Both are a concentrated store of wealth, but gold is far more concentrated. As I write this, gold is about 74 times as valuable per ounce as silver. That ratio changes with the market prices, but you get the idea.
For my purposes, silver is for small exchanges during a crisis so serious that people don’t want currency, while gold is for getting some wealth through the crisis and out the other side. Therefore, silver must be highly divisible.
Given that, large bars of silver do not fit my plan because they are not divisible enough. Junk silver coins and US Silver Eagles work just fine. One can use them to buy food, small necessities, and possibly lodging, without needing the seller to admit they can make change. As has been said by others, you don’t want to give a $400 gold piece for a chicken when a 50 cent piece would have worked.
Gold is for much bigger items during the crisis, but mostly for holding on to if at all possible. Like the Vietnamese Boat People who turned everything they could into gold, then used the gold to pay for escaping the country, gold might be used for major costs of fleeing, and when one gets to one’s destination.
If one envisions the possibility of fleeing the country, there might be some use for gold coins of less than one ounce for expenses greater than silver would be convenient for but still much smaller than one ounce would require. However, given the bigger premium per ounce, I think one should limit the number of smaller coins. I’m not sure that for our purposes 1/10 oz coins are worthwhile, but a few 1/4 and 1/2 ounce Gold Eagles might be very useful.
Since the vast majority of Americans are not familiar with the private mints of rounds and bars, I avoid them: the small difference between the premiums on junk silver coins and Silver Eagles vs rounds from private mints could very easily be lost when selling to someone who doesn’t recognize even the big mints’ products. Still, there is a big market for them, and I would much rather have them than nothing.
The recent discussions here about precious metals inspired me to re-read some short essays by Philip Diehl, the retired 35th Director of the US Mint. In his blog, which seems not to have been updated since 2014, he discusses the role of gold as wealth insurance. He emphasizes that the role of gold is not to make money, it is to preserve wealth. Just like paying for fire insurance for 30 years without ever suffering a fire, one should not rue having paid the insurance premiums, nor should one be sorry for putting money into gold.
Here are a couple links, and you can pursue Diehl’s other essays from there:
There are some things to consider before buying PMs, and when actually doing so. Here is a CoinQuest article which covers 21 of them, including the difference between buying bullion and collecting numismatic coins: ‘How to avoid rip-offs when investing in gold and silver.’
If you are interested in gold, another article I think is worth reading is Greg Reynolds’ 2012 Coin Week article, ‘Coin Rarities & Related Topics: The Proper Value of Generic U.S. gold coins’ .
There is apparently a small seasonal difference in gold prices, and if one has a regular buying schedule, it might make some sense to take advantage of the price dips one can reasonably expect over the course of a year. This article includes a graph of gold price trends January-December based on market fluctuations from 1994-2014. Of course political/economic events can change price trends in any given year, but it is worth knowing the long term seasonal trends:
Here is a long article on counterfeits, which covers mostly numismatic coins, with a number of useful links at the end, including one on fake silver dollars from China. It should give anyone pause about dealing with unknown sellers.
If you are going to hold PM coins, including modern bullion coins, it is important to take care of them. All coin holders are not alike, even some which look identical. Here is a summary of the different types, their pros and cons.
One possibility is using bullion coins as jewelry. I like it, but others may not. My thinking is that if one is going to have silver and/or gold anyway, one can have some very nice jewelry for the relatively small additional cost of bezels and a gold or silver chain necklace. You can easily get either gold filled or 14 carat gold bezels for any of the common gold coins, and sterling bezels for silver coins and Silver Eagles. When Roosevelt called in gold during the Depression, gold jewelry was exempted.
Of course, wearing coins will subject them to wear, which may well reduce their value somewhat, so if you are going to do that it is important to buy coins which are already worn, or as it is called, ‘jewelry grade’. Jewelry, especially gold, can be a form of every day carry for a small amount of wealth, and it can be worn under the clothes so not to attract attention.
Buying precious metal may not be for you, but it is an interesting subject, and worth doing some reading on.
Prizes for this round (ends October 11 2015 ) in our non fiction writing contest include…
- First place winner will receive – Two Just In Case… Essential Assortment Buckets courtesy of LPC Survival a $147 value, a Wonder Junior Deluxe Hand Grain Mill courtesy of FoodPrepper.com a $219 value, and a gift certificate for $150 off of Rifle Ammunition courtesy of LuckyGunner Ammo… Total first place prize value over $516 dollars.
- Second Place Winner will receive – A case of Sopakco Sure-Pak MRE – 12 Meals and a Lifestraw Family Unit courtesy of Camping Survival.com, and a One Month Food Pack courtesy of Augason Farms.com
- Third place winner will receive – $50 cash.