Ten Commandments of PM buying

Discussion in 'Financial Cents' started by melbo, Feb 25, 2006.

  1. melbo

    melbo Hunter Gatherer Administrator Founding Member

    Franklin Sanders has a Great site on this


    Ten Commandments For Buying Gold & Silver :

    I. Always take delivery

    II. Never buy premium if you can avoid it.

    III. Buy bullion for business, numismatics for fun.

    IV. Buy silver first, then gold.

    V. Buy small gold first, then large.

    VI. Never buy exotic coins or modern rarities or anything you don't understand.

    VII. Know your dealer.

    VIII. What governments can't find, they can't steal.

    IX. Never swap bullion coins for U.S. $20 gold pieces.

    X. Never break the law.

    If you want to invest in gold and silver to protect your assets and have something easily divisible and spendable in the event to hedge currency depreciation or collapse, then:

    v If you have $5,000 or less to spend put half in US 90% silver coin, and half in British Sovereigns, French 20 Francs, or 1/4 oz. American Eagles. (All references to “ounces” below mean troy ounces of 480 grains or 31.1034 grams).

    v For $10,000 buy two-thirds US 90% silver coin, and the balance in British Sovereigns, French 20 Francs, or 1/4 oz. American Eagles.

    v For $25,000 buy 3 bags of US 90% silver coin, $2,000 worth of Sovereigns, French 20 Francs, or 1/4 oz. American Eagles, and the balance in one oz. Krugerrands, Austrian 100 Coronas, Mexican 50 Pesos, or American Eagles.

    v For $75,000 buy 10 bags of US 90% silver, $5,000 worth of Sovereigns, 20 Francs, or 1/4 Eagles, $5,000 worth of platinum Nobles, and the balance in Krugerrands, American Eagles or 100 Coronas. For over $75,000 simply do multiples of this portfolio.

    If you want to invest in precious metals to simply protect your assets and don’t think you’ll ever need to actually barter with them, then

    v If you have $5,000 or less to spend put half in US 90% silver coin, and half in one ounce Krugerrands or American Eagles, or in Austrian 100 Coronas or Mexican 50 Pesos.

    v For $5,000 through $25,000 put at least half of your money in US 90% silver coin. Put the rest in one ounce Krugerrands or American Eagles, or in Austrian 100 Coronas or Mexican 50 Pesos.

    v For $75,000 buy 10 bags of US 90% silver, $5,000 worth of platinum Nobles, and the balance in Krugerrands, American Eagles, 100 Coronas, or 50 Pesos. For over $75,000 simply do multiples of this portfolio.


    Moneychanger, what is US 90% silver coin and why do you recommend it?

    US 90% silver coin is quarters, dimes, and half dollars minted before 1965. Each face value dollar (4 quarters, 10 dimes, or 2 half dollars) contains 0.715 of an ounce of silver. Coins are traded in “bags” of $1,000.00 face value containing 715 troy ounces pure silver. (We refer to a “face value dollar,” the value stamped on the coin’s face, which is always less than from the “paper dollar” cost you must pay. So if you have $1,000.00 in paper dollars to spend, you will never get $1,000.00 face value.) You can purchase any portion of a bag that you wish.

    We recommend 90% silver coin simply because right now it is the cheapest, most divisible, most widely recognised and traded form of silver.

    Moneychanger, why do you recommend gold coins like Krugerrands, Austrian 100 Coronaes, and Mexican 50 Pesos, and what are they?

    We recommend these foreign coins because they cost less per ounce and give you more gold for your money than the American Eagle gold coin series. All of these coins are well known in the industry and any dealer will readily buy them.

    The 22 karat South African Krugerrand gold coin contains exactly one troy ounce of fine (pure) gold. The American Eagle copied the Krugerrand’s specifications, and is minted to exactly the same weight and fineness.

    The Austrian 100 Coronae is an official re-strike from the Austrian mint. It is 20 karat (90% pure) and contains exactly 0.9802 troy ounce fine gold.

    The Mexican 50 Peso is an official re-strike from the 400-year old Mexico City mint. A 20 karat coin, it contains exactly 1.2057 troy ounce of fine gold.

    These three coins take turns as the cheapest coin on our price sheet.

    Why do you recommend older-issue, foreign fractional gold coins instead of modern issues or American Eagle fractionals?

    Modern issues like American Eagles, Maple Leaves, Philharmonics, and Nuggets include half, quarter, and tenth ounce coins: the smaller the coin, the higher the cost per ounce. With the smallest coins, premiums over the gold content approach 15%. That makes no economic sense because gold is gold. British sovereigns (containing 0.2354 troy ounce fine gold), French 20 francs (0.1867 oz.), Swiss 20 francs (0.1867 oz.), German 20 marks (0.2304 oz.), Netherlands 10 guilders (0.1947 oz.), the whole series of Mexican peso coins, and a number of other gold coins offer lower cost per ounce and good liquidity. Not recommended are gold coins so infrequently seen in this country that you will suffer a big discount when you sell them, such as Iranian Pahlavis (0.2354 oz.) or Saudi guineas (0.2354 oz.). If you can’t sell them, they’re not a bargain.

    Moneychanger, nowhere in your recommendations do I see anything about pure gold coins like the Canadian Maple Leaf or Austrian Philharmonic. Why not?

    Gold is one of the softest and most ductile metals. Pure gold coins scratch and scar very easily unless handled with extreme care. Throughout history gold coins have generally been alloyed with copper or silver, hardening them to withstand circulation. Customers often unwittingly damage pure gold coins and therefore receive up to 5% less for them when they sell. In our opinion the purity of 24 karat gold confers no benefit and in fact often creates drawbacks.

    Franklin Sanders
  2. ghrit

    ghrit Bad company Administrator Founding Member

    That was helpful. Thanx.
  3. ghrit

    ghrit Bad company Administrator Founding Member

    One thing needs to be remembered when meddling with PMs. The metal itself is a commodity, and is traded in exactly the same manner as wheat, soybeans or pork bellies, and is subject to the same rules of supply and demand. PM value will float according to those rules as readily as any other commodity. The net effect (from our perspective, that is barter) is to substitute one medium of exchange (say silver) for another (say FRNs) that for some reason have not maintained value into a situation (say TEOTWAWKI). It is as a tool for exchange, not the intrinsic value, that will be useful. Extreme case for illustration: You have a wheelbarrow full of 90% coin, monkeyman has a fresh side of beef that represents an overstock to him, and he is willing to do a deal. BUT, he also has a wheelbarrow full of coin, more than Tina can use for making jewelry for trade on another market. He doesn't need your silver at all. FRNs are useless because of massive deflation, worse than the RM after WWII. The effect is that the silver has no value to either you or mm FOR THIS PARTICULAR DEAL. Without another commodity to deal with, you are going hungry, and the side will spoil. (Note carefully here that we are talking about gross amounts, not meal sized units. mm might trade a pound of hamburger for a pound of coin because he doesn't want to see you starve. That is an equivalence that has to be established at the time of the deal. but since he has more coin than he can use, that is a charitable act, not a trade.)

    The fundamental reasons for having PMs has nothing whatsoever to do with trade in TEOTAWAKI. It has everything to do with relative value fluctuations during a messy monitary situation. If you hold PMs for hedging on either up- or down swings in the market, you need to recognize the risk of tying up assets in a commodity which may or may not be relevant in the future. To my mind, and mine only, it makes little sense to stock up on commodities, since the value is unpredictable. I could do a thought experiment that creates more than one scenario where PMs have no value at all, maybe that precious stones become the basis of trade. But even then, it is speculative to assume the stones would be in demand or universally desirable. My nickle is on land. That, and the ability to control it's use, will be the thing to have if SHTF.

    Northwoods and mm should get together and set up an ice house. When all power is gone, an icebox will keep the side fresh. NW harvest ice in the winter off them damn cold Maine lakes, mm supplies the sawdust and structure, and away they go with something to trade that will be needed. Hm. A slab of ice for a case of TP. Not too bad a trade if the only leaves around are poison ivy --
  4. TnAndy

    TnAndy Senior Member Founding Member

    ghrit.....I disagree somewhat with your statement that silver is 'only' a commodity.

    Silver is money....so is gold.....and have been for 4-6000 years.....

    In the example you gave ou have a wheelbarrow full of 90% coin, monkeyman has a fresh side of beef that represents an overstock to him, and he is willing to do a deal.

    A perfect example of the use of money. MM has a pershible commodity that in a week or a year will be worth little....but if he trades ( sells ) it for MONEY, which is something that retains it's value, he can spend that money somewhere down the road.

    That's the function of money and why it was invented.

    Today's banksters and govt would LOVE to convince folks that silver IS just another commodity and the paper promises they issue are money....but it ain't so.
  5. ghrit

    ghrit Bad company Administrator Founding Member

    Not completely true, but close enough for gov't work. What it is really is a medium of exchange that is pretty universally recognized, thus used in that function. Nevertheless, it's intrinsic value fluctuates with time (else how to explain the fluctuations of the market?) and the availability of it and the other commodity that you wish to exchange it for. The difficulty with using it as "money" is that some circumstances will render it less useful as communication wanes in a bad situation. The value could be entirely different on the west coast from the east coast some time after SHTF. The traders that move it from west to east, increasing the supply in the east, will alter it's relative value. The only class of folks that made out in the gold and silver rushes were the merchants and traders. In the example given, mm has no need for coin, therefore it's of no great value to him directly. If he choses to accept it, he (sorta) acknowleges some value determined by what it may serve him for. He has no guarantee that the wandering trader with a donkey cart needs or want any of it for pots, pans, spices or TP...

    Sink your spare bux into land that can be used by yourself, or rented out for crops or livestock, or has a resource (water, minerals) that can be traded for necessities. Historically, the folks that own or control a resource are the ones that make out in the long haul, right up until the resource runs out, or the need for it becomes defunct.
  6. monkeyman

    monkeyman Monkey+++ Moderator Emeritus Founding Member

    I tend to agree to a large degree with Ghrit and also with melbos point of useing it going into and out of TEOTWAKI. In a situation like that, if I have the means to produce what I need from my land then very few things have much value to me so if you want my spare side of beef then the thing that silver is most likely to be valuable to me for is to cast into bullets for a muzzel loader so I can save my modern ammo for desperate need. So when your hungry and Im not and each bullet being around 1 oz, then how many bullets is a side of beef worth and how much better off would you have been to have bought that amount of lead? On the other hand I might buy a big stack of them green pieces of paper from you for a little silver or for a roast so I could hold it in case things came back to what they are now and it regained its value, if it dosnt then it makes passable TP. On the other hand if I have that side of beef hanging and you have a 50 pound bag of salt then Im gonna be begging you to make that trade 6 months or a year into times of not being able to buy salt at the corner store and sugar or black pepper or most seasonings the same way since I can use those and they cant be gathered or grown around here. Yeah silver and gold are the longest standing forms of money but the FRNs are just as true of money even if a flawed system because they are valued and accepted as tender, PMs could are at the most basic leavel realy no different in that if folks dont have need of them then they are of NO value and if most folks are not accepting it as payment then it has no value for trade beyond what it can be used for. Toss in the fact that the vast majority of folks dont have PMs, especialy in coin form, and so it would be VERY difficult for it to become the standard of exchange since most folks have none and those who have some mostly have small amounts and so there is not enouph to be circulated and be the normal exchange. Since it cant practicaly become the standard of exchange (though it may well be gladly accepted by some) then if I take it as payment it is little different from any other comodity in that I may or may not be able to find someone who has what I want that will accept it as payment. I guess the best example of this would be to go out today with some silver coins, go to the gas station and fill up your car. The silver is worth at present say 10x face value, so put $20 of gas in the car then try to pay the clerk with $2 face value of silver or even offer to pay 2 1/2 times the price by giveing them $5 face value of silver coin and see how well recieved the offer is. Most likely you will wind up paying them full face value in one way or another if its a check, coin or plastic or have the cops called. Its all just based on whats accepted and even now PMs are not widely accepted as payment, it may become more accepted if TSHTF or it may be less accepted.
    Now haveing said that then if you have the spare funds to do so then to buy the PMs and use them to aquire FRNs at say $1000 FRNs for a dime of silver when things colapse (at that rate not bad price for TP) and then if things bounce back you have improved your situation if not no big loss.
    If you have the funds for the PMs though IMO you would be best served to first be sure you have all you would need to provide your needs on your own and not HAVE to do much if any trade to get by, then you gather some excess of solid goods for trade like say spices and such, looking to history 'exotic spices' or the ones not readily available localy have been worth as much or more than silver and many closer to the value of gold by weight. Once a person has gone 6 months or a year with nothing but totaly bland food and is deprived of salt I know 8 oz of salt would have more value to me than 8 oz of silver.
    PMs can be a great investment and among the most secure but I would have to say that it would be foolish to deprive ANY other areas of need to provide for the PM budget.
  7. melbo

    melbo Hunter Gatherer Administrator Founding Member

    The problem with straight goods for goods barter is the timing. Goods for goods allows for no storage medium. In our little post SHTF community, say 3 yrs into the crash, monkeyman has meat, ghrit makes shoes, TN_Andy grows Veggies and melbo repairs small mechanical items.

    If I need a pair of new boots but ghrit does need any gunsmithing or kite repair done RIGHT THEN, we need a storage medium to keep track of the IOU or credit. Sure, I could keep a list of all the 'units' that are owed to me by my repairs. But I think a token might work better.

    Ag and Au were chosen as these 'tokens' by people a long time ago for the properties they have. Not talking about industrial uses here... mainly durability and scarcity. Scarcity ensures authenticity and protects against inflation

    If I need beef and mm doesn't need anything from me, an agreed upon amount of Silver could just be the perfect IOU or placeholder for that trade.

    'money' is really just a Labor Battery
  8. ghrit

    ghrit Bad company Administrator Founding Member

    Which exactly supports the "medium of exchange" thought process. The ice analogy above can't work past the ice harvest season unless there is storage (which is pretty easy, as it turns out) or fast transport (which does melbo no good living 1500 miles from NW.) But so far as a medium goes, it could as well be diamonds or bushels of soybeans, both of which can keep from one season to another or longer (as long as I feed the cat when there aren't any mice around.) Canned beans would do as well, maybe. The trick, in any case, is establishing the worth of the medium such that all involved in the round robin of trade agree is fair and equitable. (With a nod to melbo for the "battery" analogy, it is quite accurate. [bow] I can trade labor for beans, silver, rocks of an agreed quality, or wheat if bread is in short supply in my teepee. Or store it to hit up mm for some hides to make into shoes during next winter.)
  9. ColtCarbine

    ColtCarbine Monkey+++ Founding Member

    Wouldn't it be better to buy 99.99% silver builion bars over 90% silver U.S. coins? :dunno:

    What if the value of the U.S. $$$ goes in the [flush], then what it's just silver isn't it? :dunno:

    ETA: Aren't some saying the value of the U.S. $$$ will be in the [flush] soon?
  10. Aptus

    Aptus Monkey+++ Founding Member

    I think so... from what I've read, it seems to hinge on the following things:
    - Huge National Debt
    - Iranian Oil Bourse
    - Fed no longer publishing M3 (just seems suspicious... since they could pump more money into the econ. w/out our knowledge. If anyone knows of another way to find out if lots of money is being pumped in, could you tell me?)
  11. Clyde

    Clyde Jet Set Tourer Administrator Founding Member

    11th rule of PM Buying:

    Never shop for PM on Ebay when you have a good buzz going. You might over pay on a buy now and not remember purchasing until 2 days later. Clyed was [own]
  12. monkeyman

    monkeyman Monkey+++ Moderator Emeritus Founding Member

    I brought this one up recently and the responses made sense in that its the silver in the old US coins that has the value and the reason the coins are better than other forms of silver is that they are in small enouph amounts of silver to be useful (ie if you want a dozen eggs and only have bars of silver and I dont have 'change' you are going to do without eggs or pay a REAL high price for them) and the fact that being minted in the coin form it is recognizable and thus reasonably secure that it is in fact silver of a given amount and purity as opposed to say tin or something made to look like silver or even say 20% silver and haveing to weigh it out.
  13. melbo

    melbo Hunter Gatherer Administrator Founding Member

    It is exactly why you would want to be Holding Metal when the Dollar breaths it's last. Paper money can evaporate. Gold and Silver have had value since before Jesus was born. They brought him some didn't they?

    There are 3 types of PM buyers that I can think of...
    SHTF buyers, (Don't care what it costs or if the price rises or falls)
    Investors hoping the price will rise, (Buy low, sell high and wait for a dip and buy some more)
    And Hedges against a Dollar death, (those that want to be holding something physical when the $=0)
  14. ghrit

    ghrit Bad company Administrator Founding Member

    True, but it is still true that they are worth only what you can trade them for. Somehow, the value in trade has to be established before metal can be used as a medium. In other words, a name has to be hung on whatever the convenient unit will be. I'll grant that PMs will be recognized as having value, but only what the marketplace assigns. For sure, the value of PMs today are not what they were in 10 AD, nor 200 BC, nor 2006. The value is currently assigned by the market in terms of dollars (or Euros) which in turn tells you how many pork bellies you can buy with how many ounces of platinum. That equivalence may not hold post shtf.
  15. melbo

    melbo Hunter Gatherer Administrator Founding Member

    ghrit. I agree in a SHTF sit. Metals are not the silver bullet. Perhaps Water Filtration is a better barter item. But,I'm not 100% into PMs for SHTF either ;)
  16. Bear

    Bear Monkey+++ Founding Member Iron Monkey

    Actually.... in a SHTF scenario.... the ultimate "Silver Bullet" is between your ears.... what you've done to prepare is mostly a mental exercise... the physical items are the result... thoughtful preparation is the key to surviving "well" in any scenario.... whether it be times of plenty, lean times or famine.... Prosperity in any situation isn't about luck or timing.... its mostly about knowledge, wisdom and action....

    Hopefully, you're not just sitting on YOUR silver bullet...

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