“You Can’t Eat Gold”

Gold (3)

Ever been in a debate with someone on whether precious metals such as gold and silver constitute real wealth?  More than likely, you may have heard the anti-metals people say, “You can’t eat gold.”  However, I am a firm believer in holding precious metals. Let me outline how the “common-man” prepper should approach precious metals as there are several stipulations.

First Understand…

That if the world doesn’t end like you’re thinking it will, humans will continue to facilitate trade with money.  There is not one single successful country in history that was able to maintain itself through barter.  Money is an idea of the human mind, and to come together in physical form, it must have several qualities.

  • People must agree to it as a medium of exchange.
  • It serves as a store of wealth for a long period of time.
  • It can’t be easily counterfeited.
  • It has to have units of measure/account that can be divisible.
  • It must be portable and durable.
  • And lastly, it must be fungible or interchangeable (e.g. – a dollar from 1968 is still worth the same as a dollar printed 2014).

Humans have used everything from shells, tally-sticks, and paper as money.  However, precious metals such as gold have been used for almost 5,000 years as money, thereby outlasting its competitors.  Therefore, although you can definitely use other physical forms as money if they meet the above properties, gold has some positive history behind it.

Additionally, look at what major central banks (China, Russia, India, etc.) across the world are doing at this very moment – they are buying up gold and silver.  Why?  Well, at this point in history, almost everything is at risk.  No one knows how the cookie will crumble.  Central banks such as the People’s Bank of China (PBOC) feel that gold has some of the least risk:

“No asset is safe now,” said the PBOC’s Zhang Jianhua at the end of last month.  “The only choice to hedge risks is to hold hard currency—gold.”

When do precious metals come into the equation for a prepper?

One should only start to consider precious metals after they have secured other hard assets including all the basic necessities – shelter, food, water, ammo, firearms, etc.  At this point in our country, I would say acquire everything you need for a minimum of 1 month.  However, as we look at incredible pace of negative news within this country and around the world, I would start to extend that timeline much more (3-6+ months).

Although preppers are never 100% comfortable with how much they have prepared, when you get to a point of “comfort”, you will have a certain amount of preps stocked up, and currency stocked up in your bank account.  That currency is broken down into three categories:

  1. Day to day expenses – Keep your currency in your bank account for your day-to-day expenses, plus a little extra for what life may throw at you.
  2. Emergency Funds – Keep at least 3 months expenses in currency available.  I would personally keep this in a fireproof safe bolted within your basement.  With cyber attacks on the rise, you never know if your account may be drained.
  3. “Free” or Retirement Money – This is where you should start diversifying your currency in precious metals.

The anti-gold preppers would say the free money should go into food and ammo; that no one would ever want your gold as there is no use for it in the post-apocalyptic world.  All around the world countries have gone through SHTF scenarios, and gold still had it’s place… so I really don’t buy that argument.  In fact, there are many scenarios where refugees escaped an oppressive country with only a few gold coins.   Those gold coins allowed them to restart their life.

Although I agree you can’t eat gold coins, other hard assets have their draw backs as well – mainly weight.  No one should ever put all their free cash into preps, but if you did, look at the implications:

Five (5) troy ounces of gold coins @ current market value are $1,200 per ounce – that is $6,000.  That amount of money would buy you approximately. 16,600 rounds of 5.56 AR-15 ammo which weighs around 450 pounds.  If you ever are displaced from your primary home, I would rather be leaving with my core preps and 5 gold coins (or ideally various denominations of gold/silver) than suffer the agony of leaving behind all that ammo.  Sure, you can bury your ammo in various cache’s, or store them at various locations, but even that comes with it’s own risk (e.g. – can’t retrieve it, get’s stolen, etc.)

It’s about diversification

Those who are dismissive about precious metals are losing sight of the overall picture – its about diversification.

  • Ammo is great but it can be heavy, has a shelf life, and you may not be able to barter with it if someone doesn’t have that specific weapon.
  • Food is great but has a shelf life and is also heavy.
  • Gold and silver are lightweight investments that hold a great deal of wealth.  You can be incredibly mobile with them, but again, if people do not agree to it as a medium of exchange, you are shit out of luck.

Don’t be dismissive…diversify.

Start small

I’m sick of hearing investment professionals talk about diversification in terms of buying land and real estate.  The common American is hurt so bad from 2008 that we don’t have that kind of money.  However, we can invest in silver which is relatively cheap at around $20 an ounce.  Start small and buy a couple coins from a local retailer, or online from one of the many websites available (e.g. – JM Bullion, SD Bullion, etc.)  If you start to get into gold, balance it with silver at 50/50 in terms of price value in US $.  Remember, you don’t have to go all out and buy a full ounce.  Gold bars are also offered in gram weight, so you can purchase gold pieces for $200 or under.