Should You Buy Gold?

Should You Buy Gold?

With the current set of economic upheavals, we're seeing the “BUY GOLD!” ads, and ads disguised as information, in a lot of the prepper-sphere. There are always a few such ads -- investing in precious metals as a hedge against inflation can be a good strategy -- but whenever the world starts to tilt a bit off-center, the metals merchants ramp up their advertising. Let's go over some basics about precious metals.

Gold is, and has been, a form of money for millennia. As a fairly rare metal that doesn't tarnish or rust, it is easy to store and work with. Being soft and dense for a metal, gold is well suited for ornamental use. For the first half of the existence of the USA, our paper money was backed by gold and was very stable. Other than the small percentage used for making jewelry and artwork, all of the gold that is mined is still in circulation, even if it is sitting in a vault somewhere. Large transfers of gold rarely involve physically moving it; the custodians just change the name on the paperwork that tracks who owns it. Gold is currently (Q1 2022) selling for around $2000/oz on the spot market, making it a very compact way to store fairly large sums of money.

Silver is a slightly different story. Since it is used in several industries, silver actually gets consumed over time. Being the best conductor of electricity we have, some gets used up in the creation of electronic devices. Old-school photography used to use tons of silver in the chemicals used to produce film, to the point that “mining” old x-ray sheets was a profitable way to get silver. Some US coins minted before 1965 (dimes and quarters mostly) were actually made of silver and are now collectible. Well-worn or “circulated” silver coins are called “junk silver”, and bags of them pop up for sale on occasion. Silver prices are floating around $25.00/oz right now, making it more suitable for use in small transactions.

Other rare metals like Platinum and Palladium are a specialty market; they have industrial uses and are not common enough to use as currency. Copper and Nickel have been used as money in the past when they were fairly hard to get, but modern mining techniques have made them too common.

Buying precious metals is your choice, but I can't recommend basing your preps on them. Here are my reasons for being less enthusiastic about gold and silver than the salesmen are:

  • You can't eat gold. Basic preps are water, food, and shelter, and gold is none of these. It may let you purchase the basics, but only if there is a seller that wants gold/silver.
  • Counterfeiting coins has existed for as long as coins has. Ever wonder why dimes and quarters have ridges around their edges? Their purpose is to show if someone has shaved the coins to harvest a bit off of the edges. Foreign coinage and miniature bars may have official markings, but there is a level of trust involved every time they change hands.
  • Gold is compact, which makes it easy to store, but also makes it easier to steal or lose.
  • Gold is too compact for everyday purchases. How are you going to “make change” for a $10 meal if all you have are coins worth $2000 each? Divisible coins like the Spanish dollar, made up of eight “Reales” (the “pieces of eight” of pirate lore) were one solution, but we don't have anything like that in circulation.
  • Governments have outlawed the private possession of gold in the past and can do it again.
  • Being a physical commodity, metals are finite. Unless you have won the lottery, you won't be able to store enough to carry you through a long-term crisis. Preppers need to be able to produce something or provide a service that others are willing to trade for in able to survive long- term.

Personally, I don't store gold or silver, preferring to stockpile things that are of immediate use and easier to trade. Given a time machine, I would like to go back and put more of my retirement savings into gold, but that is nothing more than 20/20 hindsight. None of us know exactly what the future will bring, so we just have to plan and prepare as best we can and figure out ways to get through the surprises that life is going to throw at us.

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