«-- Letter Re: Influenza Exercise Shows the Potential for Major Infrastructure Disruptions | Main | Note from JWR: --»

Letter Re: Gold is Going Up, But is Now a Good Time to Buy?

Jim,
I am going to become a 10 Cent Challenge subscriber before the end of the month because the information provided in SurvivalBlog is invaluable and has forever changed my way of thinking!

I have been a reader for about a half year and have seen the topic of gold come up several times. Gold is apparently at a 28 year high and the desire to get invested from my personal standpoint is high but my question is do you see gold leveling out or continuing its upward trend? The other part of the equation is I am young father of four young children so my assets are extremely limited at this point in my life. That being said, I would ultimately like to "physically" acquire both gold and silver that I can keep on hand since I fear not being able to access it in a sudden SHTF scenario like a terrorist, NBC, etc. At the same time I need to balance this with buying other preparedness items that I have a long list of.

I already have a decent inventory of weapons but need more ammo than what I have on hand. I have about 1,500 pounds of various wheat, soy, rice, corn, and barley but most of that was nitrogen packed in 1999 putting me in position to need to rotate those supplies with a newer inventory. In addition, I have started a fairly detailed list of supplies that range from communications to medical.

All that being said, I kind of feel like I am about to sit down and eat an elephant and I really don't know the best place to start. Thank you, - Dave in Florida

JWR Replies: First, let me state forthrightly that physical preparedness for your family should be paramount. Only after you have your beans, bullets, and Band-Aids squared away should you consider buying any precious metals. In my opinion, the precious metals are still in the intermediate phase of a bull market that will likely propel gold past $1,500 per ounce, and silver past $75 per ounce. Although you will not benefit to the same extent as someone that bought silver when it was between $4.13 and $5 and ounce, you have not "missed the boat"!

I'm often asked whether I prefer silver or gold for investing and barter purposes. I strongly prefer silver, for several reasons:

1.) Silver coins are ideal for barter. Gold is essentially too compact a form of wealth for practical barter. If you need to buy a few loaves of bread, silver dimes make a lot more sense than even the smallest denomination gold coin. Sure, you could divide a gold coin with cold chisel, but that would reduce its recognizability. I still recommend buying pre-1965 US circulated 90% silver dimes and quarters, with no numismatic value. (What the rare coin dealers derisively call "junk" silver.) These coins trade solely on their silver bullion value.

2.) Silver is far more likely to double in value than gold. Not only is silver in greater relative scarcity, at present (after decades of mine production deficits for that required for industrial use), but it also will benefit from what I call the "penny stock effect." This is a purely psychological phenomenon, since silver still seems affordable, whereas gold is already out for reach for many investors. Psychologically it is "a long way" from $700 to $1,400 in order for gold to double, but it is conceivable that silver could double from $13 to $26 in just a few days. It is much like buying a "penny stock" (under $1 per share.) It doesn't take major moves in a market to make penny stock double in value.

3,) Silver is less likely than gold to be confiscated by government decree, in the event of a monetary crisis. The logistics of accomplishing a gold confiscation (like the one that occurred in the US in 1933) would be complex. But since silver is roughly 55 times more bulky and weighty than gold, the sheer volume of silver in circulation would make a silver confiscation very difficult to accomplish

Regarding your bulk storage foods purchased in 1999: Some of them--most notably the wheat--are worth keeping. If you bought white rice, it is still most likely edible, although its nutritive value would be marginal. But the wheat should be just fine. It has a 30+ year storage life, even without nitrogen canning, which should extend its useful life even more.

Permalink