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Save yourself from inflation & feel like a pirate
Old 06-29-2007, 10:44 AM   #1
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Save yourself from inflation & feel like a pirate

As I am nearly FIRE, I felt that my investments needed some diversification, as well as insurance against inflation. While googling for just that, I read some interesting articles pointing too the historical role of gold and silver as protection from inflation. Essentially dollar goes down, gold/silver goes up. It isn't always linear, and that seems to be a good thing for early investors since inflation fears send lots of people scrambling toward the metals, and their values sometimes shoot disproportionately high, but the overall trend seems to be there.

Then the articles would usually discuss ways to own the precious metals (PM's). There are mining stocks and ETFs to consider, but what I found most interesting was that most local coin shops buy and sell the physical stuff at a relatively small mark up over the daily spot price. You can also buy it online from a company called Kitco.com. You can buy big ugly 100 oz bars of pure silver presently at around $12.50 per ounce or some smaller beautiful gov't and privately minted bars and coins. Gold can be bought in 1 oz coins and bars too. I think gold was at around $650.00 per oz.

Storage is something that I'd be concerned with, and obviously others too, since I saw a website that had suggestions on how build a modern day treasure chest for burial. This was called "midnight gardening".

From what I read, they are taxed as capital gains. I'm too chicken to mess with the taxman much, but for those of you who can sleep with one eye open, there are also some not so subtle suggestions that since there is no paper trail surrounding the purchase, or sale, that they are essentially only taxed if you decide that you want them to be.

Also, not really my biggest concern, but it looks like the Y2K survivalist types suggest that PM's are the likely replacement if the dollar totally crashes and burns, or if any of their other world rocking predictions come to pass.

I would like to hear the downside to PM's, as there seems to be plenty of people writing articles who maybe like them just a bit too much, but not many contrarians on the subject. Thanks
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Old 06-29-2007, 01:42 PM   #2
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I think the only problems with gold are that it isnt coupled to inflation anymore, it doesnt seem to automatically become a place people run to when things get dicey, and its not particularly a good 'store of value' any longer.

Oh, and it also didnt go anywhere for more than two decades until the recent run up.

Other than that, its a great idea.

A lot of people like that idea about gold becoming a currency if the economy completely falls apart. I'm thinking dried foods and bullets will be a little bit more useful. Both to get by and to keep other people with guns from taking your gold, should it actually be worth something.
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Old 06-29-2007, 05:08 PM   #3
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I think the only problems with gold are that it isnt coupled to inflation anymore, it doesnt seem to automatically become a place people run to when things get dicey, and its not particularly a good 'store of value' any longer.

The folks in the pro-PM camp say that one of the reasons that the US dollar is losing value vs most other major currencies is that over the years lots of US greenbacks ended up overseas to be hoarded since they were able to be used in daily commerce pretty much everywhere, and were viewed with a great deal of confidence when compared with their own national currency. Now, with a decreased confidence in the US buck (for whatever reason), lots of these dollars are coming back to the States, which in turn adds to the huge pile of US dollars in circulation, which if I'm not mistaken, (and maybe I am) is the precursor to price inflation.

As far as a place to run or if it's a good store of value, I am not well informed enough on the topic to comment, but I'll spend some more time checking into it, thanks for the assignment.


Oh, and it also didnt go anywhere for more than two decades until the recent run up.

Going back to the earlier theory, those US dollars were the stores of value around the world for those two decades, but it could be argued that the dollar is on shaky ground now, and that the gold run up in price has taken place at precisely the same time as the dollars nosedive.

Other than that, its a great idea.

A lot of people like that idea about gold becoming a currency if the economy completely falls apart. I'm thinking dried foods and bullets will be a little bit more useful. Both to get by and to keep other people with guns from taking your gold, should it actually be worth something.
I hadn't thought about it like that, but you're right, if all h___ breaks loose, give me a rocket launcher, a case of whisky (would prefer beer, but fridge isn't likely working at this point) and a lifetime supply of mac & cheese. YEEE HAWW!!
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Old 06-29-2007, 05:44 PM   #4
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but what I found most interesting was that most local coin shops buy and sell the physical stuff at a relatively small mark up over the daily spot price. You can also buy it online from a company called Kitco.com. You can buy big ugly 100 oz bars of pure silver presently at around $12.50 per ounce or some smaller beautiful gov't and privately minted bars and coins. Gold can be bought in 1 oz coins and bars too. I think gold was at around $650.00 per oz.

Storage is something that I'd be concerned with, and obviously others too, since I saw a website that had suggestions on how build a modern day treasure chest for burial. This was called "midnight gardening".

From what I read, they are taxed as capital gains. I'm too chicken to mess with the taxman much, but for those of you who can sleep with one eye open, there are also some not so subtle suggestions that since there is no paper trail surrounding the purchase, or sale, that they are essentially only taxed if you decide that you want them to be.
The metals are taxed at ordinary income rates, not capital gains.
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Old 06-29-2007, 11:50 PM   #5
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The metals are taxed at ordinary income rates, not capital gains.
Just reporting what I read, I have little expertise in taxes. These are the things I need to know before putting any serious money into PMs. Thanks
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Old 06-30-2007, 12:51 AM   #6
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I was reading through one of the peak oil forums (the one at Life After the Oil Crash, to be exact). I quickly stopped after I noticed at least one person recommend leveraging as much equity in one's house as possible to buy as much gold as possible.

Now, personally, if the world ends, I'm bartering. And, since I can't eat gold, turn it into clothing, or use it to build something, it'd be useless to me. I'm going to lobby to bring back sea shells as currency if it comes to that... ooh, or how about big round stones?

Seriously, though, owning some big 100 oz bars does seem like a lot of fun and a potential hedge.
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Old 06-30-2007, 08:38 AM   #7
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I guess if all else fails, you could make some gold bullets and hammer some out into gold leaf to wrap sushi in.
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Old 07-02-2007, 11:54 PM   #8
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I guess if all else fails, you could make some gold bullets and hammer some out into gold leaf to wrap sushi in.
I think that you make a case for silver since you would be safe from werewolves.
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Old 07-03-2007, 07:19 AM   #9
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Dont forget the garlic...
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Old 07-03-2007, 07:40 AM   #10
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Hmmm - gold, guns and garlic - nah it was 7 years of freeze dryed food(Biblical, Mormon, or somebody I don't remember). Plus you needed a place in the boonies away from the clueless city hordes.

Not that I bought that stuff in the 70's, living in Colorado - but I do have a 10% interest in a patented gold mine near Jamestown - could build a vacation cabin someday, maybe.

heh heh heh - the freeze dryed technology worked out great for backpackers. Target Retirement in retirement - party on. Happy 4th and yes I'm buying some fireworks.
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