You can’t eat gold.
I have heard that phrase so many times in the past whenever the subject of prepping turned to an economic collapse and the importance of buying precious metals was proposed as a solution. There are several facets to the debate around the usefulness or necessity of having gold and silver on hand but I wanted to take a couple of swings tonight and see what everyone else thought. You do seem to see people who swear by precious metals and they are admonishing everyone to go out and buy as much silver as possible. There are others who are feverishly collecting “junk silver” and spend I can’t imagine how much time pouring over bags of dimes from the bank.
There are others who say buying gold or silver is foolish and this is usually for two reasons. The first is the title of this article. You can’t eat gold, so if you are starving what good is it? I guess more accurately, it would be if nobody will give you anything to eat for the gold what good is it? The second argument is usually from the financial types that say Gold is headed for a correction and any money you put into gold now would be wiped out if the market “decides” that gold has no more value.
I will say right now that I am not an expert on precious metals. You could look at my bank account and say I am not an expert with my regular bills probably. I do not have an economics degree and I don’t understand the intricacies of financial markets. To be honest, I think the whole game is rigged and no matter what you know, there are very few experts but there are quite a few people who know how to play the game. What I want to share with you is only my opinion based upon the facts as I understand them within the conversation about whether or not you should plan on holding some precious metals and I would like everyone who cares out there to share your opinions and maybe we can all learn something.
The reason for this post is an email I received from Mark. In his email he asks some great questions
I have read on PJ and many other prepper sites about the importance of buying and storing gold or silver for when the SHTF. However, as I imagine an emergency happening (like a Long Term electrical grid down), you and I would have a very short time to use US currency to purchase supplies before all merchants stopped selling their goods. My neighborhood “Mom & Pop” grocery store and hardware store owners kept open during the 2012 week-long power outage here (due to a derecho), but Walmart and other chain stores shut down immediately due to their reliance on electronic inventory and cash management systems.
Once folks realized it was Long Term, why would any neighbor or merchant trade away something of use, like food, fuel, or tools, for something which does not have any independent use, like gold, silver or US currency? It makes more sense to me to stock up on barter items (like those listed here at the BackDoor Survival site ), and have enough cash on hand to buy as much as possible from the corner stores immediately after I see that a Long Term emergency has started.
If gold or silver would be useful at some point, when would that be? Who would accept it as payment for goods or services?
The main questions Mark is asking are will gold and silver be valuable and who would accept this as payment?
Will Gold and Silver be valuable?
I think we have to honestly say “it depends”. Precious metals have a value now, but only because they are in demand and the market says they are worth a certain value. There are people willing to pay for your gold or silver at a certain amount. The amount people pay has varied wildly in the past. In 1970 you could buy an ounce of Gold for $36. Today according to JM Bullion, Gold is selling at close to $1300 an ounce.
The market has always gone up and down and that is why they say any investment is risky. Can you imagine paying $1300 for an ounce of gold only to have that ounce be worth $30 the next day because of some market implosion? It’s no different with stock. You could purchase 10 shares of Apple today for $570 a share and something weird could happen in the news to cause Apples stock to crash next week. If that happened, all your investment would be worth less than you paid. Investing to me is gambling.
Each of you has to analyze the risks associated with purchasing anything. Gold and Silver are no exceptions, but the way we seem to depend on them as preppers or even investors is different than say, stocking up on hard red winter wheat stored in 5-gallon buckets. Gold or Silver is supposed to preserve our wealth but we rely on them maintaining their value in the future. If they don’t hold some value, what can you do with them?
Who would accept Silver as payment?
Getting back to Mark’s question which seems to be the most important one we preppers need to think about. Who would give us anything for our Silver or Gold that we purchase now? For this I see two largely polar examples.
The first example is that we go on without any global economic collapse. There are no wars and everything is fine generally speaking. If this happens, you should look at any precious metals purchase as a hedge against inflation. As long as you hold that precious metal, and provided the price doesn’t drop below what you paid for it, you can always sell it to recoup your money. This assumes that inflation will always rise and the value of your dollars will be less. We are already seeing signs of this.
The second example and one that I believe is more likely is that we will have massive economic troubles ahead. Are they going to be so bad that paper currency is worthless? Maybe. I have purchased my own supply for that reason, but I don’t think we would be able to walk into the local Mom and Pop store, lay down a few pre 1965 dimes or a 1/4 ounce gold coin and walk out with armfuls of food and a goat. First, I don’t think Mom and Pop will have any food for very long as Mark said, but more importantly, I think a system where people give value to gold and silver could take a while.
The value of precious metals will be there I think, but if it all goes to hell in a hand basket, you won’t be able to use that gold or silver for a while I think primarily because the majority of people don’t know anything about precious metals. Money to them has dead president’s faces on it. If you offer to pay for something with a silver round, you will have to first convince the person you are trading for that your coin is real and you would both need to mutually agree on the value. This will take some time I think and we will be bartering goods for a long time before we are paying with precious metals.
Why do I have them myself then? Because I am gambling too I guess. I am betting that our paper money is going to lose value more quickly than Silver. I guess only time will tell if the naysayers were right and I end up wishing I would have traded that silver for bread or lead or something else.
What do you think?