Gold Rushes and Silver Linings

I once received an inquiry centered around alternative forms of currency for personal preparedness. I received the following set of questions (paraphrased):

What do you think of gold and silver for bartering purposes? Gold is far to expensive for our budget; however, silver is an option. I feel leery however having witnessed several other “hype” induced fads that burst (dot.coms, real estate, etc.) Once purchased, what about storage? I would doubt easy access to safe deposit boxes would exist in a crisis and storage within the home seems risky (burglary, vandals, etc.).

So…here’s what I wrote back…maybe it will be helpful to you too.

 “As far as precious metals for currency, I usually don’t discuss them [during the presentation] (unless asked 🙂 ) simply because they can be such “hot buttons” for some folks. However, having said that, I am personally a huge proponent of considering alternative forms of currency in case we lose the dollar someday for any number of reasons. I see this as leaving a couple of currency options that I believe could be realistic based on the scenario. 1) precious metals and 2) ammunition. I find myself in the same boat as you with thoughts on gold. And quite honestly, I wouldn’t buy gold (or much gold) even if I could and here’s why. Consider this, if things are so bad that you can’t get to your bank monies or that the dollar has lost its value, only things with inherent value will be feasible for bartering, i.e. precious metals. So…if you REALLY need a loaf of bread to survive but all you bought was gold pieces for hundreds of dollars apiece, guess what you just did…bought a $400.00 loaf of bread. What you really want would be precious metals but in what would be considered “small bills”. Don’t give the guy a fifty for that bread, give him a five!

SILVER. Now, problem is silver is also pretty expensive right now. So what can you do? Junk silver is one answer. I can’t guess what your knowledge base is here so hopefully this won’t bore you, but junk silver has no numismatic value. Which simply means that given it’s “banged up” or “junk” quality, there is no extra value for things like condition, year, rarity, type of coin, etc. The good thing is though, that it does have inherent value based on its silver content. There were coins produced way back when that have .999 percent pure silver content. These are worth money based on the price of silver per ounce. And in terms of money in a crisis, they will spend based off of their content instead of their numismatic value (which by the way, during a crisis wouldn’t matter anyway, no one would care that it was a really rare coin, just what it is worth.) So there are those of use who are stockpiling (as our budgets allow) in small batches at a time, junk silver. If you Google it, you will find more information than you can possibly consume. I don’t have as much as I would like, but we are working on getting more as our budget allows.

The only problem is that you and I aren’t the only ones thinking this way…so junk silver is getting harder and harder to find or afford. What I recommend is you do a little research into the cost of silver per ounce (again, internet), find your local coin shop, and stop in and ask if they have any “bulk” or “bagged” junk silver. If they do, ask how much they are selling it for. Do the math. Keep in mind, there is NO value in the junk silver other than the silver content, so if the broken down by ounce price is very inflated, leave because it’s not a good buy. Most of the time, it is marked up just enough for the guy to make some sort of profit, but not that much at all. Expect to be told by at least a few shops that they are “fresh out”. There’s been a run on this stuff lately. (And its been going on for months!)

Now where do you keep it??? This ties into home/self-protection. Start pricing guns safes, the big kind that will hold long guns. You should have one large enough that no one idiot-crew of thieves could possibly get it physically out of your home and well made enough that they also cannot break into it. If you shop around, you can find something good on the day after Thanksgiving sales for example. They are sometimes marked for clearance as well because they were an old floor model or they were scratch and dent (but what do you care what it looks like?). If you can get it to also be fireproof, I’d see about that as well. Make sure the wife can actually open it for sure. She needs to be able to ge into that thing in a hurry and under stress (muscle memory). Also, consider approaching your home owner’s insurance company about whether or not they insure precious metals. You could add it to yourcoverage via a floater policy.

As always, I hope this helps. Take care.


3 responses to “Gold Rushes and Silver Linings

  • SA

    Ooooh shiny. I do like silver. Really any denominations are a good size for barter, a good rule of thumb is junk silver has about 71.5oz per $100 face value. When buying or selling you can keep up with day-to-day fluctuations in spot price here http://www.coinflation.com/silver_coin_values.html

    I prefer to have a mix of everything with a bias in the middle; in other words I have more quarters and halves than anything but some of each. Generally the smaller the size the more wear the coins will have, and some coins such as ’64 Kennedys that were made at the tail end of 90% minting will have the least amount of wear. I don’t like 40% silver muddling up my stack so I don’t concern myself with it much. If one can find a deal on some by all means jump on it, I never have found any that tempted me though. So, if it wasn’t minted ’64 or earlier I don’t own it. Same goes for 35% silver “war nickels” minted from ’42 to ’45.

    I should note that some “junk” actually does have numismatic value, but it is rare that such a coin should make it through commercial grading. I have pulled an extra few bucks out of generic bags, but going through it all is very tedious and apparently not worth doing in general, but I do it anyway.

    Oftentimes when buying small amounts on a regular basis it might be a good idea to get friendly with any LCS’s in your area (Local Coin Stores) There can be good deals on Ebay but frankly unless you’ve got time to kill and are extremely savvy about who to buy from it is often more trouble than it’s worth. I won’t even get started on Craigslist.

    Sometimes pawn shops will have decent deals, but I haven’t had much luck there. Same with estate/yard sales etc.

    In these days of uncertainty it certainly pays to be aware of alternatives to paper, whether it’s government fiat or even mutual funds/stocks.

  • SA

    Since I guess I would classify collecting metals as a hobby at this point, I was thinking about this post again earlier today and thought I would mention a couple more things about government minted metal.

    Pennies made before 1982 are 95% copper and worth over twice face value. Some but not all of the 1982’s are copper, the easiest way to tell is to weigh them… zinc cents only weigh 2.5grams while copper cents weigh 3.11grams. There is quite the industry in sorting and selling these coins, so the percentage of copper pennies in circulation is continually dropping.

    Even easier to take advantage of are nickels. Absolutely no sorting required, just keep them. They’re worth about 5.7 cents right now.. you effortlessly get back over 10% face value from Uncle Sam every time you stash one. Eventually any sort of serious accumulation will obviously begin to be a space issue. But if history starts, as Twain might say, “rhyming” again, at some point they’ll get the penny treatment and Gresham’s law of bad money driving good money out of circulation will begin it’s work on a new front.

    The really interesting thing about harvesting U.S. minted copper and nickel “from the wild,” so to speak, is that you’re basically in the same position that silver bugs were in the late 60’s, early 70’s. Other than storage, there is absolutely no downside involved. There are essentially two scenarios that can be played out, deflation or inflation. (And maybe both simultaneously but that’s another post.) In the first case, a deflationary environment, the purchasing power of your physical currency’s face value increases. In the second case, an inflationary environment, the value of the constituent components of your physical currency increases.

    Deflation is obviously very, very bad… think Great Depression. I personally think he more likely outcome is steady inflation creep for quite some time, since we’re in a box where the government cannot raise interest rates to keep it under control because it would destroy it’s balance sheet… our cost of borrowing is already a very large chunk of the federal budget, and anything near like interest rates were in the early 80’s would send it literally through the roof.

    Anyway I’m rambling, good luck out there everyone.

  • keepbuilder

    Wonderful add ons for this post! Thanks for the help!

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