Total Survivalist Blog: silver

When I was home for leave my very good friend and nominal coauthor Ryan were able to catch up. He mentioned that he was somewhat interested in precious metals but wasn’t quite sure where to start. I meant to send him some info but whoops, it never happened. Anyway it popped back into my head recently. I thought this might be a worthwhile blog post to boot. So anyway.

A lot of big names in survivalism say that you should not get into precious metals until you have your beans, bullets and bandaids squared away. One big name defines that as a years worth of food. I am not going to say they are wrong but I look at it differently. To me precious metals are not part of my preps parse, they are the ultra conservative portion of my financial planning. To me a dollar that is going to silver isn’t a dollar that would be going to beans or bullets, it is a dollar that would be going into savings or investments. You could look at it either way or some other way.

[I realized in writing this that it is important to define some terms for newbs. When talking about pre -64 90% silver the term face value is used.

Face value

is the value of the coins at the time of minting, back when they were just money. A dime is a dime face value, 10 dimes are a dollar face, etc. 90% silver is often sold this way in $5 or $10 rolls and $50, $100 and $1,000 face bags.  It is important to note that these bags are not weighed but sold by face value. Typically with newish or normally circulated coins the difference between the actual weight and the theoretical weight at manufacture is tiny. However in large quantities when dealing with seriously worn coins it matters. Either negotiate a significant discount for or pass on big bags of heavily worn dimes.  

Bullion

is just that, metal that is made into a bar, ingot, coin or round that is sold essentially as metal. To me this includes the new American Eagles, Canadian Maple Leafs and such. They may or may not have a nominal monetary value but the cost of the metal is the real value. Precious metals are traded as commodities like oil, corn or whatever.

Numismatic

is a phrase that means collectible. Basically these are coins or whatever that are rare and or in particularly good condition and thus have significant value beyond their metal content. This is a totally different game than bullion with its own rules. It is one I don’t fully understand and do not involve myself in. If you want to collect coins that is great but I would consider it a hobby not part of your financial or preparedness efforts.

Spot price

is the value of an ounce of silver or gold (or copper, platinum or whatever but they are outside of the scope of this post) strait out of the ground. Obviously it costs money to make that metal into a coin or bar and those folks have expenses and want to make a profit. Also the guy selling it has expenses and wants to make a profit. The difference between spot price and the actual purchase price is called a

Premium

. For various market reasons some products have higher premiums than others. For example an American Eagle gold coin always costs a few bucks more than a Canadian Maple Leaf or a Krudgerrand. In silver big names like Englehard can carry a premium of a buck or so. Feel free to ask if you have questions about anything.]

Are you ready to invest in precious metals?

By the theory I do not subscribe to you should have a bunch of beans, bullets and bandaids. (Certainly you should at least have a functional weapon with some bullets, and enough food, etc to deal with a snow storm or a hurricane.) If you look at it more as a financial thing like I do one would want to take care of any nasty debt like credit cards or anything above say 8% interest rate and have some cash savings. If you do not have some basic survival stuff like a pistol or a shotgun, some food, a way to cook it, etc and have an outstanding balance with Visa at 18% then it might be wise to throw your resources at those issues. Lets just say that you have some basic preps and no nasty debt before jumping into PMs.

How To Buy?

It depends on your overall situation. If you have a good amount of money sitting around you could go order a big bag of silver and or some gold and be done with it. The stockbroker seeing the writing on the wall and ordering a hundred thousand dollars in gold is kind of an urban legend in contrarian investing and precious metals circles. For most folks we don’t have a lot of money lying around so we will be making purchases as our income allows. The concept of

dollar cost averaging

is worthwhile to consider here. However like any financial plan I recommend that you

pay yourself first

. Maybe you buy a one ounce round every payday or whatever you can afford. Figure it out and stick to it unless your situation changes significantly. This doesn’t need to be a big thing just come up with a reasonable plan and execute it regularly instead of waiting till the end of the pay period and hoping there is something left. You may or may not want to go full on Dave Ramsey and allocate every dollar before you get it. We don’t have a complete budget but we plan our saving and investments and execute them consistently. However our financial situation as bills relate to income is pretty comfortable. If we had credit cards with big balances, car loans and whatever we would go full on OCD. Typically like diets I would say the worse your situation is the more you need to be strict about it.

What to buy?

“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 $32 which puts a one ounce round probably at $35-36ish. Pretty much anybody can afford to pick one up a paycheck. If you can’t free up a bit under $40 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 $2,500 bucks) amounts. We will revisit this when we talk about where to buy the stuff.

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 knowledgable 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 anybody not living on the street (heck even a wino could cut down their Thunderbird consumption or panhandle a bit more agressively and pick up a 90% dime or quarter from time to time) can afford to buy it, if slowly and in small incriments. 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 $1,660 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 noteable 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, 1/4 and 1/2 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 problematicly 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.

Where to buy?

Fundamentally there are three options. Brick and mortar dealers, online dealers and private  individuals. I will discuss the first two at length and then briefely hit the last.

It is important to note that you really need to be a smart consumer when it comes to PM’s. Check on

Spot Price

and know what sort of premiums a given product typically carries. Also be sure to consider the full cost of getting a product to your door. This means your time and travel to a shop or shipping from an online dealer.

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 I have heard 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. However if you have some other issues going on this could be useful. 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 testing silver and gold or grading coins if you have the gift of gab and are a decent customer (or offer to help clean up or whatever). 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. With these guys you need to either be patient or flexible. 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 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 competive prices just that the products will be what they are sold as.

Personally I used

APMEX

for a long time and have heard good things from

Zero

about

Montana Rarities

.

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.

Face to face transactions would have the same risk of counterfeits. I would need to be a lot more competent at testing gold, have calipers to take measurements and a scale to consider doing this. To make matters worse there are also security concerns. Remember

that Marine who got shot trying to sell a gold necklace

? If conducting such a transaction would meet somebody in a pretty public place, ideally with obvious cameras and carry a gun. If it was a significant transaction I would wear soft body armor and bring a couple friends with their own guns. No need to show up like gangsters, two guys at the next table sipping coffee would go unnoticed but could be very helpful if things went sideways.

Unless somebody you know and trust  is selling what you want to buy I am not a big fan of personal transactions there are just too many issues involved for the couple bucks you might save.

Well I hope this gives some insight on my thoughts about getting into PM’s and helps you make some informed choices about purchasing PM’s.