note: article first appeared in May 2015, updated/edited in July 2019.
So the question that I get asked quite a bit is, “Should I have gold and/or silver and how much?”
Great question! And for me it is an easy answer, but maybe for different reasons than you might think.
So, what is the answer?
It is not a simple answer but I will get into the details but first, if this is a question you might have, I want you to answer this question,
“What would be (or is) the purpose for you owning (or wanting to own) precious metals?”
My answer – I want to have some “real” money if, (or I should say) when, the fake fiat paper money that the US Dollar is fails.
Yes, to both. Let me explain, get a dollar bill out of your wallet or purse. Now look at the front of the bill (the side with Washington’s picture), what does it say up at the top of the paper? “FEDERAL RESERVE NOTE” (if you have a real dollar bill). What does that mean?
Ah, well my friends who is the Federal Reserve? Well, funny you should ask, the Federal Reserve (Fed) is the central bank of the United Sates…and it is made up of 12 commercial banks located in different regions around the country. The Federal Reserve is NOT part of the US government. The Fed has no government agency providing oversight, auditing or control. Everything the Fed does internally is secret from everyone, including the government. Yup!
And why is this important? Well, you see the term “note” means “loan” in the English language. So the $1.00 bill you are looking at is a loan (promissory note) to the Federal Reserve in the amount of $1.00.
So? That means the dollar bill is not truly money, it is receipt for a loan you have made to the Federal Reserve and that “note” like other loans can be defaulted on. And the US Government doesn’t have to stand behind (i.e. guarantee) that it will make good on that dollar bill should the Fed decide not to honor it as a note or loan.Yes, the dollar bill does say it is legal currency for all debts public and private. That simply means that you can exchange that note with other people to help identify the value of what you are exchanging. But remember, the note is only as good as the entity that is backing it. And should the entity decide to no longer back it, then consider what actual value does that dollar bill have. In any event, with what exactly would the government pay you for your dollar bill? In other words…what would they give you if you tried to redeem, or cash in, that Federal Reserve promissory note?
So you see the paper money you think you have in your wallet or purse is actually only a promise to pay a loan. A loan with absolutely ZERO assets to secure it with. Sounds pretty shady to me. US currency needs to be worth something tangible to make any sense, right? Coins used to be made out of silver and so they were actually worth something tangible. Paper currency used to be redeemable for precious metals, but no more.
So ask yourself, “Why did they stop backing currency with precious metals?”
Yeah, getting a little spooked yet?
But let’s talk about the money you have in your bank account, mutual fund, 401k, IRA, etc. How much is that worth? Well, it is only worth something if you can take it out and convert it into cash, right? So that “value” while in the bank or mutual fund company possession isn’t even worth Federal Reserve Notes at this point, it is only “digital” money existing in the computer world.
And think about the phrase “full faith and credit.” Yeah, that is what is supposedly backing up the US currency (Federal Reserve Note). The full faith and credit of the Unites States government. The same government that is currently $23,000,000,000,000 ($23trillion) in actually debt and another $120,000,000,000,000 ($100trillion) in unfunded liabilities.
I have laid the basic groundwork for my explanation of the value of precious metals to a “prepper.” But now I will lay out my mission for precious metals:
To have a source of a tangible currency of intrinsic value with which to bribe and buy during the initial stages of a “grid-down”, emergency, or disaster.
Yes, you read that correctly. I have not bought into the whole “investment” aspect of precious metals and I certainly don’t have enough assets to make me wealthy…hence, using it as a wealth preservation tool. Precious metals are a horrible investment because its value can be so erratic. If I was worth a million dollars I would probably have about $100,000 in gold. That would make it easy for me to retain some of my wealth in the event I was unable to access the bulk of my assets. If I had the need, I could transport my gold “insurance” rather easily since it would weigh less than 7 pounds.
Now let me explain to you my mission for precious metals the way it works for me. Let’s take the most extreme case, which is where I think the real purpose actually lies. So the grid goes down, most people don’t have a lot of cash on hand, so they will try to use a credit or debit card to panic buy “things” they think they need such as food. How long do you think that card accepting capability would continue working? I think debit and credit cards would be useless rather quickly. Cash would probably become unavailable rather quickly once people burned through what little they had on hand and the ATM machines ran out and the bank doors closed.
So what is left?
People with precious metals will get it out and start using it to buy the things that they need. The word will get around pretty quickly that there are people willing to pay for things in gold and silver vs. paper money. The people with “stuff”…who will want to sell that “stuff” to? Yup, people with gold and silver. Which then naturally becomes very valuable since it is the only true currency that is in demand. Hence, gold and silver has increasing value.
Remember I said “bribe and buy” and I laid out the case for “buy” in the preceding paragraph. How does the “bribe” come into play? Easy, people without gold and silver will want it. People that have ways in which to earn it will want as much gold and silver as they can acquire.
Remember my “power and money” concept?
- People with money want power and can buy the power.
- People with power want money so they use force or commerce to acquire money.
Yes, that is exactly how government and politicians work today. But we are talking a “grid-down” situation. Now simply substitute “money” with “gold.” How’s that working for you now?
Practical Example #1: You have $500 in cash from your gun safe and head to Sam’s Club to buy the last 20 gallons of olive oil and 100lbs of rice. You get there and the manager tells you the store is closing because they can’t transact credit or debit cards anymore. You tell him you have cash. He says he doesn’t care. You get out a 1/10th ounce solid gold US Mint coin. He says, “Welcome to Sam’s Club! How can I help you?”
Practical Example #2: You are trying to make it home and there is a roadblock. You are the second car in line and you hear them say that the road is closed and no one is getting through. You ask for the supervisor and ask to speak with him privately. While asking him to be let through you let him see the 1oz gold US Mint Eagle coin and assure him that his family would appreciate the help that gold would bring to their security. Fifteen minutes later you are 10 miles down the road having passed through the roadblock.
The examples could go on and on but you get my point. When paper money becomes worthless or scarce, precious metals will be in demand. And if you have some, then you will be able to buy power since you have real money.
Yes, there is a dangerous downside to having it. Other people may want it so badly they will simply try to take it from you. And they may hurt or kill you, or your family, in the process. So you do have to be smart about how you handle precious metals and who you try to bribe and buy from. But that is another topic – security.
Now, for the average prepper, what kind or precious metals and how much? Again, for me it is simple.
Silver – is the poor man’s gold. Silver is more easily purchased because you can do so in dollar amounts that is more compatible with most people’s budgets. An ounce of silver right now is in the mid-$15 range. Gold about mid-$1,500 range. And for “grid-down” situations buying I like “junk silver.” Technically that is only a nickname, junk silver are 90% silver coins. Silver coins are easy to recognize and calculate value since they come in dime, quarter, half-dollar, and dollar denominations. And so that makes transactions easier, faster and more defined.
Silver “rounds” are 1oz silver coins put out by various mints. They sure are pretty and they are in demand. They are .999 pure, or should be. Then there is silver “bullion.” It is much harder to transact with bullion since the true purity and value is almost impossible to assess in the field. So I would buy 90% silver coins first. If I still had some extra money I would buy silver rounds in either 1oz or 1/4oz weights.
Gold – I like gold for a couple reasons, mostly just because of the “feel” in your hand or when it “clunks” on a hard stone surface. I would only recommend you buying US Mint coins. Yes, coins from South African, Australia and Canada are reliable and high quality, but I only want the US Mint stuff. And I don’t like full 1oz coins because they are so expensive to acquire. But mostly I am not crazy about them because when trying to make
a deal after grid-down. You have a full ounce of gold and do you really think you are going to be buying or bribing for something that valuable? So my solution is 1/10oz US Mint “eaglets.” They will run about 11 – 12% of the cost of a full one ounce coin and worth every penny. But, if I had enough wealth that I was going to try and transport then I would use the 1oz Eagles.
Now, how much precious metals to buy and have on-hand –
I will look at this as 100% valuation regardless of the $ amount you have available to purchase precious metals. So it doesn’t matter how much money you have to purchase precious metals, I will go by percentages of that amount.
The first $3,000 – here is my step-by-step method of acquiring precious metals:
- 60% in junk silver, mostly dimes, then quarters, then fifty-cent pieces.
- 20% in 1/4oz silver rounds.
- 20% in 1oz silver rounds.
Any amount after the first $3,000 – here is the step-by-step:
- 50% in 1/10oz US Mint gold eaglets.
- 25% in in junk silver, mostly dimes, then quarters, then fifty-cent pieces.
- 20% in 1oz silver rounds.
- 5% in 1/4oz silver rounds.
This gives a person a very well rounded cache of precious metals. But notice that the first $3,000 purchased is all in silver. Then after that $3,000 I would include some gold. And finally finish it off with more silver.
- Don’t buy it all from the same place or dealer.
- Don’t buy it all on-line.
- eBay is a decent place to buy silver coins and rounds if you watch for deals.
- Don’t store it all in one place.
- Some in the gun safe.
- Some in the garage.
- Some in the ground.
- Don’t tell anyone but your spouse where you have hidden it.
- Buy it with cash whenever possible.
- Do not use credit cards or go into debt to buy precious metals.
Almost final thought –
I think there will be a small window of opportunity after a grid-down event when precious metals are worth the most. I am thinking maybe after the 3 – 7 day time-frame but before the 30th day of grid-down for sure. After about a month I think its value will go down considerably…or trying to use it to bribe and buy may become very dangerous. Then, after the worst of TEOTWAWKI is over, I think precious metals will become valuable again. But it could take years for that to happen, if it at all. And then there is always the possibility that even owning precious metals could become illegal and would be confiscated. Yes, it has happened before in the United State under a radical Progressive socialist President.
Final thought –
Precious metals should be the last thing you purchase for prepping. You should have your guns & ammo, your medical supplies, your water filtration and storage, your food storage (for at least a year), your communications gear, and your 3-year seed bank before you buy any precious metals. Once all that (the basics) is taken care of then you can consider precious metals as a “prepper” item. Until then…stay the heck away from precious metals, it isn’t worth the risk.
A thought for your consideration…
A wise man once said “You can’t eat gold.”
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