Total Survivalist Blog: reader questions

Ryan,

Didn’t know where to post but I’ve seen on a few different posts lately you’ve brought up Gold and Silver.
That is something I don’t know much about between prices, where to go,
what to get (rounds, coins, etc.), whats a safe amount, the works. If
you have any knowledge, I’d love to hear about it! Of course, IF you
have time! Thanks! I appreciate it!



Jack

 Jack, I will do my best. Please do not take this as gospel and do anything extreme solely because of something written here but I will try to answer your questions based on my experiences and observations.

First let’s get a foundation on my thoughts about precious metals in general.
I do not like PM’s AS AN INVESTMENT. Making money
buying and selling commodities requires buying low and selling high. If
you have those skills that is great. Personally if I knew how to do that
reliably I would be doing it for a living. That makes it basically
gambling which probably is not smart.

I do like PM’s as a conservative piece of my overall financial
situation. Sort of like insurance or an alternative savings plan. I like
them for protection against high inflation, currency debasement and
even an outright economic collapse. They generally move opposite to more
modern instruments like stocks and such which is nice. For most people
assuming they are halfway financially squared away (no huge credit card
balances, etc) putting some money into PM’s makes sense.

1) Prices. Gold and silver (as well as other traded metals) prices go up and down based on the market and are tracked by so called “spot price”. The closest thing to compare it to for an average lay person would be gas prices in that they change regularly and sometimes wildly.

The base for gold and silver prices is the day’s “spot price” and above that there are various premiums. Spot is theoretically what a dirty lump of metal is worth fresh out of the mine. This premium represents the costs of refining the metal into whatever coin/ bar/ ingot it ends up in as well as the costs and profit of the distributor who sells it to the vendor and the vendor ‘s costs and profit also.To make it more complicated for different products the premium varies example

Gold Eagles

tend to always cost a little bit more than

Canadian Maple Leafs

. This is one of those things where you can either try to figure it out or just know this is a bit more expensive than that. 

When comparing products it is important to consider your total end cost. Saving a buck on a coin then paying $20 for delivery is not a win. You get the idea.

2) Reputable local brick and mortar stores or reputable online dealers like our advertiser

JM Bullion

.  I have also done business with Montana Rarities and APMEX (neither are advertisers though I wish they were). I talked a lot more about different options

in a previous post

. (Edited for brevity and clarity)

To recap from that post. Fundamentally there are three options. Brick and mortar dealers, online
dealers and private  individuals. I will discuss the first two at length
and then briefly hit the last.

Brick and mortar dealers are often coin shops that deal numismatic stuff
and have bullion as a sort of side effort. Also pawn shops and some jewelry stores deal in bullion. Brick and mortar stores have
some advantages. The first advantage is that they are convenient. Hard
to beat picking up a silver round or a small gold coin every payday on
the way home. Also if you decide to pay cash they have the factor of
discretion. Personally I just can’t see Cops kicking in the doors of
everybody who bought a few silver rounds or a gold coin so this is not
much of a concern for me. Another advantage is that some of these folks can
help you learn about PM’s. The old guy hanging out in his coin shop
might be willing to help you learn about different types of coins and maybe eventesting silver and gold or
grading coins. Also if it is a small shop and you
are a good customer they may give you a call when products you like come
in. Furthermore the coin/ pawn shop guy can be a good “grey world”
contact who knows how to get stuff.

This is not to say that brick and mortar shops don’t have disadvantages.
The biggest disadvantage of brick and mortar dealers is often price.
Some of them for whatever reason charge crazy prices. I once laughed in a
coin shop guys face when he wanted $10 OVER SPOT for beaten up no
name 1 ounce silver rounds. It varies shop to shop based on their
business model, competition and how informed their customers seem to be.
Heck it may even change based on how much they think they can get away
with on a given customer. The next disadvantage is often availability.
Especially with the folks who have bullion as a side business like
numismatic coin or collectibles dealers and pawn shops they
predominantly sell what they have bought. This means they may have 90%
silver one week, 1 ounce rounds the next, a couple 1/4 ounce Eagles here
and some Krudgerrands there. Since brick and mortar stores are a local thing I
can’t make any meaningful recommendations but I have had good dealings
with a few in the past.

Online dealers like

JM Bullion

tend to have the best prices and greatest availability
which are their biggest advantages. Also comparison shopping is easy and
you can do it on a Sunday morning in a bathrobe. The first downside is
that you have to pay shipping. One absolutely must consider this in
their “is this a good deal” calculation. It also makes frequent small
purchases cost prohibitive. Paying $5 or 8 to ship something worth $35
or $40 is cost prohibitive for sure. That it is difficult to impossible
to be anonymous could be a disadvantage or turn off for some folks. Also
if for whatever reason you needed to turn cash into metals TODAY an
online dealer would not be a wise route.

One of the biggest benefits of established dealers who make their living
selling metals is that their livelihood rests on their reputation. If
through bad intentions or neglect they sell some fake stuff they are
totally hosed. Due to this they are as a rule honest and above board in
their dealings. This doesn’t mean they they will always have competitive
prices just that the products will be what they are sold as.

Personal transactions vary from boringly easy to the wide open wild
west. I have purchased silver from a family member. I had some cash and
they had some silver and we swapped. Online type purchases of PM’s from
private folks have, at least IMO an uncomfortably high likelihood of
fraud. I have been burned in a small way on Ebay and will not make that
mistake again. Also there is just so much

fake gold floating around

. In the last few years some really legit looking stuff has came out of China.

3) As to what to get. Again a selected and edited repost. 

“The Moneylender” said “Buy silver before gold, buy small gold before
large gold.” I think that is pretty darn good advice. Silver is a good
way to start for a lot of reasons. First it is affordable. Right now
spot is about $27 which puts a one ounce round probably at $30-32ish.
Pretty much anybody can afford to pick one up a paycheck. If you can’t
free up a bit over $30 a paycheck I suggest seriously looking at your
overall situation. Also you can make a mistake and overpay by a bit and
it won’t kill you.

Silver

Silver can be purchased in two basic products,

pre ’64 90% silver

and

99% bullion

. There are other options but we are keeping it simple
here.Pre ’64 90% silver is dimes, quarters, 50 cent pieces and silver
dollars made before 1964. Yes our change was made of silver. The stuff I
am talking about has no real numismatic (collector) value and typically
dates from the early 1900’s to 1964. The advantage of this stuff is
that it is in small pieces. A dollars worth of silver is right about .77
of a troy ounce of silver. Thus a dime is about .07, etc. I am too lazy
to look up and type all the exact weights but you can

look them up here

.
The other option is  99% silver bullion. This is rounds or bars or
ingotts made of as close to pure silver as one can easily get. Some like

Eagles

or

Canadian Maple Leafs

are minted by a country and many others
are made by numerous private mints.These are made in all sorts of
weights but 1, 5, 10 and 100 ounce are the most common.

Both have advantages and disadvantages. 90% silver is in small
denominations. At today’s prices even one ounce rounds are too large to
make small transactions like a few groceries. Also they are readily
recognizable at least to folks who know our change used to be made of
silver. The biggest disadvantage is that many dealers charge almost
crazy premiums if you buy this stuff in small (under $100 face value
which is 70 some odd ounces and costs about $2,300 bucks) amounts. Montana Rarities treats small 90% silver customers well.

Bullion is generally a bit cheaper per ounce [Remember for these
purposes you are buying METAL, not a coin or whatever. Thus the goal is
to get as much METAL as possible for your dollars.] than 90% silver.
Also it is typically in convenient weights. If the going trade is an
ounce of silver for 5 pounds of beef or 20 pounds of wheat (or whatever)
it is a lot easier to have nice round denominations. Also some folks
say that it is good for a coin/ ingot to say it’s content and purity ie
“One ounce of .999 pure silver”. These folks thing people who are less
than knowledgeable about PM’s may be more inclined to accept their value.

Whatever you decide to go with silver is a great place to start. First
of all it is reasonably affordable. Second of all it is in small enough
denominations to sell a coint or two to a dealer and buy groceries or a
tank of gas or to barter a little bit at a time to get whatever. I would
recommend purchasing a pretty good amount of silver before thinking
about gold. If you are into round numbers maybe $100 face (70 some odd
ounces) or 100 ounces of bullion could work but it all varies based on
your situation.


Silvers biggest advantage is that it’s affordable. The
biggest disadvantage of silver is that at some point it gets HEAVY. I
know a guy who needs to use a truck to move his silver, while that is a
nice problem to have he would face some hard choices if he needed to
evacuate in a hurry. This brings us to gold.


Gold

Gold is a lot more expensive than silver and could be a bit overpriced
right now, at least in relation to silver which is probably a better
deal at this time. It is sitting somewhere around $1,560 an ounce. Gold
comes in two basic varieties. Old coins and bullion. Old coins are just
that, old coins from back when Gold was money. Bullion and new coins
such as Eagles, Maple Leafs and Krudgerrand’s pretty much fall into the
same group. Sometimes you can get good deals on the old coins,
particularly European coins from aprox 1890-1917. Just be sure to stick
to ones folks will recognize like Swiss and French Francs, British
Sovereigns and the like. New coins/ bars are convenient because they are
typically in nice round (1/10th, 1/4, 1/2 and 1 ounce) sizes and have
the weight and purity clearly written on the coin. I don’t find one
vastly superior to the other. Even weights are nice but old coins are
kind of cool too. One notable advantage of old coins (not numismatic/
collectable, just old very common coins in ok condition) is that they
are typically the lowest premium way to buy small gold.


As we said before buy small gold before large gold. Small gold would be
gold coins that are part of an ounce, typically 1/10th and 1/4
ounce and are also called fractional coins. As to how much of this stuff
to buy before going to large gold (one ounce coins/ bars) I would say
at least a couple ounces, maybe a few. For large gold I would purchase
one ounce coins or ingots. I don’t see a reason to get anything bigger
than that. For large gold I would just be sure to get something common
like Eagles, Maple Leafs, Krudgerrands or Credit Swiss ingots.

As we talked about Golds biggest advantage (already considering that it
is durable, recognizable, divisible and there is consistent demand for
it) is that it is a very compact store of value. For the price of a one
ounce gold coin you could get a nice bag of silver or a lot of other
stuff. One could toss 50k in gold into a daypack and evacuate or into a
ruck to GOOD but silver would be problematically heavy. Also gold has a
certain allure and enough folks have been able to use it to bribe/ buy
their way out of a warzone or terrible situation that it bears
considerations. 

To wrap up what to buy I would purchase 90% silver and a few one ounce rounds and then some small gold in the form of 1/10th and 1/4oz coins or common old European coins of comparable size like British Sovereigns or Swiss Francs. As to which type of gold it depends on what you find the best deals on.  Maybe buy silver when it dips, then gold when it’s down, you get the idea.

4) What is a safe amount? It is best to look at this in terms of total amount in relation to your liquid net worth. I would say 10-30% (of your liquid worth) is probably a good range. To provide an alternative perspective if I recall correctly

FerFal

says 50%.

I hope this helps. As always input, questions or thoughts are welcome.