Is purchasing physical metals (Gold, Platinum, Silver) ever a good idea?

[ejman]

Quote:

Originally Posted by scrinch In the case of economic business as usual, I think the consensus here is that precious metals are a poor choice for a buy-and-hold investment. In the case where civilization as we know it breaks down for a significant period of time, I'm hearing that food, blankets, shoes, and possibly guns and bullets would be more valuable. So what about the middle ground, where the dollar tanks and we get 100-200% inflation for a couple of years before the situation stabilizes? That scenario has occurred in many, many places over the recent (and ancient) past, usually when a government overspends and then coins or prints more money to pay its bills. That could end up in a devaluation of currency by a factor of 2 to 5, say, like in the Asian crisis of 19 years ago, or perhaps more like in the cases of Argentina, Chile, Venezuela. Would holding a modest amount of precious metals help maintain some purchasing power in that more historically common scenario? Or is that scenario not possible because we are the USA and there's no currency large and strong enough for the dollar to lose that much value against? I've got about 2% of our NW in precious metals, not as an investment for today's climate, and not to help with a Mad Max scenario, but as insurance to help get through a late-1980's Argentina scenario. Probably it won't happen, but it only costs us 1/50 of our annual potential investment income as a hedge, and I do kind of recognize that governmental "spend and print" pattern.

I suspect that real estate would probably be a better hedge against the type of inflation that you envision https://www.biggerpockets.com/renews...s-real-estate/

[Big_Hitter]

I bought a bunch of coins 15 years ago when it was dirt cheap - like $280oz gold and $5oz silver. I guess I didn't time it correctly but still a pretty good ROR for that time period... 10%?


How is that a bad investment?

[Andy2]

Quote:

Originally Posted by scrinch So what about the middle ground, where the dollar tanks and we get 100-200% inflation for a couple of years before the situation stabilizes? That scenario has occurred in many, many places over the recent (and ancient) past, usually when a government overspends and then coins or prints more money to pay its bills. That could end up in a devaluation of currency by a factor of 2 to 5, say, like in the Asian crisis of 19 years ago, or perhaps more like in the cases of Argentina, Chile, Venezuela. Would holding a modest amount of precious metals help maintain some purchasing power in that more historically common scenario?

Zimbabwe is a classic case of that. In that type of scenario hard assets are definitely a huge advantage, but typically security becomes an issue too so very often the hard assets form part of an exit strategy rather than a bartering medium to obtain survival supplies.

[Lsbcal]

Has anyone here actually tried selling their coins? I think there is quite a spread and also some shady characters out there.

[dtbach]

My dad gave me 2 #10 cans filled with silver coins about 3 years ago. They never pay any dividend and have been going down in value since he gave them to me. On the other hand they are in my gun safe which also has some lead. If the apocalypse comes it will be the lead that saves me, not the damn silver.

[Andy2]

Quote:

Originally Posted by dtbach My dad gave me 2 #10 cans filled with silver coins about 3 years ago. They never pay any dividend and have been going down in value since he gave them to me. On the other hand they are in my gun safe which also has some lead. If the apocalypse comes it will be the lead that saves me, not the damn silver.

You could always cast the silver coins into bullets....

[Texas Proud]

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Originally Posted by Mr. Tightwad I'm surprised by most of the responses. I think if the economy collapses, or disaster wipes out a chunk of America, nobody is gonna care what metal is in your pocket. Shoes will be important. Blankets. Pants. Jackets. Non perishable foods. That sort of stuff. Not just for utility, but for trading.

That is why one of my old bosses said to invest in copper... bullets... that makes 'trading' easier....

[gerntz]

When you say "physical gold", do you mean strictly coins/bullion, or does that include ETF's?

[braumeister]

Quote:

Originally Posted by Lsbcal Has anyone here actually tried selling their coins? I think there is quite a spread and also some shady characters out there.

I'm sure you can sell them successfully, but only if you know what you're doing.

I inherited a bunch of old silver dollars and wondered the same thing. So I took about a dozen of them and carefully researched their value, then took them to a well-known, recommended coin dealer to see what he would give me for them. Most were nothing special but I mixed in a few of substantial value just as a test.

He looked them over and offered about 75% of their melt value for all of them. I questioned that and his response was simply "I have to make a living."

[MichaelB]

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Originally Posted by braumeister I'm sure you can sell them successfully, but only if you know what you're doing. I inherited a bunch of old silver dollars and wondered the same thing. So I took about a dozen of them and carefully researched their value, then took them to a well-known, recommended coin dealer to see what he would give me for them. Most were nothing special but I mixed in a few of substantial value just as a test. He looked them over and offered about 75% of their melt value for all of them. I questioned that and his response was simply "I have to make a living."

I remember that. What did you do with the rest? I have to deal with this in the next few months.

[Al in Ohio]

Most folks are ignorant of golds true value. These folks read and believe fund advisor and broker related interests who badmouth it as sn "investment" since its basically their competition.

Gold will forever retain its value as the pre-emminent monetary standard. Cash is just paper currency. It can be subject to dreaded hyper inflationary devaluation. Just go back in history and research what happened. People with gold or silver had plenty to eat plus could afford any luxury. Those with only currency became overnight paupers. If you don't think Warren Buffett has over a billion dollars in silver bullion for this reason, think again.


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[phil70]

I don't post often, but this is something I have given a lot of thought to.

There are some studies that indicate gold was the best hedge against hyper-inflation of the type seen in Weimar Germany or some of the Central and South American hyper-inflation scares. Real estate has intrinsic upper limits and is even less liquid than gold coins.

The evidence does not support gold as an "investment" that will gain value over time. It has not performed that way historically and it likely never will. (Sorry gold bugs, the evidence is just not there.)

Other hedges against hyperinflation are (i) equities (did not perform as well as commodities in 1930s Germany), (ii) real estate (ditto) and (iii) still having a job since wages typically track inflation closely in a hyperinflationary environment.

So, I view gold as a type of insurance against the very specific risk of loss of value of the currency. I am putting a couple of percent of my portfolio in gold coins that I will keep in a safe deposit box and hope I never need. In that sense, it is not part of my investment portfolio, but an insurance premium I have paid. The "policy" will pay out if the price of gas goes to $100.00 per gallon.

Note, there is a big difference between hyper-inflation and normal inflationary creep. I don't think studies even support the idea of gold as holding its value vs. inflation. It moves up and down based on supply and demand. In theory, oil is a hedge against inflation, and we can see how that bet has played out recently. However, if there is systemic loss of confidence in the official currency, commodities, including gold, offer an important hedge.

[mpeirce]

Quote:

Originally Posted by Al in Ohio Gold will forever retain its value as the pre-emminent monetary standard.

I know some people believe this, but I just don't get it.

I get that historically it was valuable because of a few reasons: fairly rare, doesn't oxidize, looks nice, fairly rare, ah, what else?

So basically, other people see lots of value in it. Sounds like many other items, even fiat currency.

But then I'm a practical sort. If civilization ends, I'd rather had a huge stockpile of ammo. Squirrel isn't all that nasty...

[mpeirce]

Quote:

Originally Posted by phil70 I am putting a couple of percent of my portfolio in gold coins that I will keep in a safe deposit box and hope I never need.

Let's run with this. Let's say I have a kilogram of gold (just under $40,000 in today's value) in coins. Where should I stash it?

If your worry is hyperinflation do you really want to trust the banks to keep it safe? There have been instances of governments insisting on inspecting SDBs. You may not be able to get access to your "insurance" when you most need it.

Maybe a well hidden safe?

Other options?

[phil70]

Quote:

Originally Posted by mpeirce Let's run with this. Let's say I have a kilogram of gold (just under $40,000 in today's value) in coins. Where should I stash it? If your worry is hyperinflation do you really want to trust the banks to keep it safe? There have been instances of governments insisting on inspecting SDBs. You may not be able to get access to your "insurance" when you most need it. Maybe a well hidden safe? Other options?

Yes the government could confiscate gold like FDR did. Or you could put it in a safe, and get robbed. Or your house burns down and your gold melts into a pile of slag. (And asteroids could strike, and zombies!) We all live with some risk. As I build my wealth and approach FI, I realize that one of the bigger headaches is protecting that wealth - not just growing it.

I sleep better at night with a small amount allocated to this hedge. I'm not a gold bug, but hyperinflation strikes even developed economies on occasion. (And that's what insurance is about, right? Small risk of occurrence, big downside.)

Wikipedia is not exactly scholarly research, but this is what happened to the value of paper money in Germany in the 30s vs gold:

https://en.wikipedia.org/wiki/Hyperi...rinflation.svg

[gerntz]

Quote:

Originally Posted by mpeirce But then I'm a practical sort. If civilization ends, I'd rather had a huge stockpile of ammo.

I think that also requires a functional weapon to be of value.

[braumeister]

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Originally Posted by MichaelB I remember that. What did you do with the rest? I have to deal with this in the next few months.

I still have all of them, still gathering dust. I couldn't find a way to sell my coins for even half of the published wholesale price, so I just gave up and decided to wait for a better market.

[Ticker]

There must be some intrinsic value to the stuff, otherwise the government wouldn't keep tons of it locked up. Gold will always be money to me.

[MichaelB]

Quote:

Originally Posted by braumeister I still have all of them, still gathering dust. I couldn't find a way to sell my coins for even half of the published wholesale price, so I just gave up and decided to wait for a better market.

My brother has a couple of estate sale businesses as clients. He asked them what they do, they both named the same coin dealer and said he gives them the best terms so they always sell to him. We (which really means me) are going to assemble and document DM's collection this summer and see if he's interested.

[Al in Ohio]

Quote:

Originally Posted by Ticker There must be some intrinsic value to the stuff, otherwise the government wouldn't keep tons of it locked up. Gold will always be money to me.

Every major nation state keeps tone of gold on hand. Even China went on a massive gold buying spree several years ago to increase the amount they have on hand. The reality is that all governments view gold as the only true monetary standard. It's been that way for centuries. It ain't gonna change. If you don't get, you don't get it. Historically gold has caused huge armies to move into battle and launched thousands of ships. Large sums of cash have caused ... Well a few handfuls of robbers at any one time to pull off some noteworthy bank vault heists. You figure it out.


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