Theres a couple schools of thought on the idea of keeping gold (or other precious metals) in your stockpile of supplies and gear. On belief is that since it has no practical use (you cant eat it, shoot it, heal with it, etc) its not worth keeping. The other side of the coin (so to speak) is that gold always has a value and is worth having.
Im of the second camp. Heres why:
Yes, you cant shoot gold, eat gold, heal with gold, burn it for fuel or anything like that. Golds purpose, to me, is twofold. It preserves wealth and it is a universal currency.
The Bad Things that are coming dont happen overnight. Its usually a gradual slide (picking up speed) into chaos. When that happens, a few things almost always happen – credit becomes fairly worthless (cant run your credit card if theres no electricity and if theres a chance your bank no longer exists), checks are utterly worthless, and cash reigns supreme. Now, what if your cash suddenly starts to be worth less and less and inflation starts taking its toll? We’ve all heard the stories of Germany’s hyperinflation…a bottle of wine costs 50 marks in the morning and in the evening the empty bottle was worth 5000 marks. Did the value of the bottle increase? No, the value of the money decreased. So if you get $500 a week and then it starts taking $500 to buy what cost $400 last week, thats your dollar being worth less.
Im very bad at explaining this and I know there are people here who could explain it better than I can.
But really, I see it mostly as a hedge against inflation. If I stick $100 in the safe, in ten years it will only buy, maybe, $85-90 worth of stuff. If I throw $100 worth of gold in the safe, in ten years it will probably buy exactly the same things that it would have bought ten years ago…
Its hard for me to explain, but yes I think gold has a place in anyones preparations but as a long-term strategy. (Although in the short term its great for getting past a roadblock in Checnya, bribing border guards in Mexico, buying antibiotics in Baghdad or C-4 in Idaho) Should you buy as much gold as you can? I dont think so…I think you should first spend money on the things you need to prepare with…land, food, fuel, clothes, meds, ammo, guns, education, etc…then I think you should have ready cash available…and then, when all thats done, I think you should start salting a little bit of gold away. A couple coins every month or so….
Im the first to agree that there are times when, literally, gold will be worthless but thats the whole ‘prepared’ part of ‘preparedness’. If the world turns inot Mad Max, Ive got food and ammo…if it turns into a Soviet-style or ARgentine economy with people on line for toilet paper and food..well, thats where gold looks mighty good.
Unless of course the govt. bans it again and you go to jail if you happen to have kept any.
Bastards.
Another good thing about it is its also easily liquidated off the books. So if you buy it now at 425$ and sell it in a couple years at 600$ you can probably avoid the capital gains tax like you would have with stocks or property. (even though now you don’t have any more buying power than you did when you bought it you would still have to pay taxes on the 175$ “profit”)
I find the best term to keep in mind when talking about money, gold and inflation is buying power. The percentages and dollar figures don’t really mean anything, what we want is buying power.
I come from a long line of gold hoarders.
The problem with that is that gold has no intrinsic worth.
Yes, I know nothing has an intrinsic worth, in the sense that it has some particular value which it can be converted into. But gold’s not good for much, unless you need a corrosion-proof conductor of electricity (and as a conductor, it’s inferior to silver). You can’t eat it, drink it, or make a good weapon out of it.
If the balloon really goes up and people are hunting down State Troopers for their hats, I’d much rather have a good supply of barterables on hand than a mess of gold. Gold’s main advantage over, say, ammunition or booze is that it’s volumetrically tiny.
Seems that the best form of financial security would be the ability to do stuff that most other people can’t. Like reload ammunition or repair small engines or indulge in zymurgy.
History has shown that gold is a fine medium of trade, but its value and availability varies wildly depending on the emergency at hand. There have been times when salt and gold have been traded pound-for-pound, and times when gold was forbidden and the perfect currency was alcohol.
Gold and gems are a great long-term bet, though.
If I throw $100 worth of gold in the safe, in ten years it will probably buy exactly the same things that it would have bought ten years ago…
And, actually, that’s not true either. Aluminum at one point was a very expensive and precious metal, so valuable that Napolean III reserved the aluminum cutlery for state banquets, and used the gold stuff for daily meals. When the Washington Monument was built, the 6 pounds of aluminum on the capstone cost a small fortune. But currently, you can get a pound of nice shiny aluminum for about the same price as a donut.
Pretty soon we’ll probably start extracting uranium from seawater on a large scale. When we start doing that, you can bet we’ll start grabbing the gold from it while we’re at it. I doubt very much that a quantity of gold will, even in 20 years, buy close to what it does today.
Gems?
Not really.
Excellent point.
Yes, you cant shoot gold…
Gold makes fine armor piercing bullets. It functions almost identically to and is slightly denser than depleted uranium.
not sure how much i would want to practice with that. 😉
Buh?
It certainly does not. Gold is extremely soft, malleable, and ductile as metals go. It might present a high areal density while moving through the air, but upon striking a surface it will instantly deform significantly, having all the armor-piercing qualities of a dud HESH round.
Gold has a tensile strength of about 15ksi, it could be work-hardened to maybe twice that, but that hardening won’t survive an impact at velocities of over a mile per second. Wrought uranium has a yield strength of 86ksi, and alloys can get up to 140ksi. Uranium projectiles also have a crystalline structure which leads to self-sharpening; as pieces shear off during penetration, they leave behind a single sharp point, and as penetration increases and more pieces shear off, the sharp point remains, keeping areal density high.
Gold does not do this. Gold makes good bullets in James Bond movies.
Awesome article.
Nope. Gold is way too soft. You could use it as you would pure lead – patched roundball out of a muzzle loader but thats about it.
I think your missing the point…on the way down to the hat-stealing lifestyle gold will have value, much like in Third World cities today…although at the bottom of that societal slide it may not have any value. Additionally, Im mentioning it as part of a layered strategy of cash, metals and barterables/consumables.
What makes gold the near perfect “money” is threefold- divisibility, rarity and the fact that it is almost perfectly inert.
First, divisibility. When you have any commodity that can be used as money, ideally you would want to make change. Gold can be made in the smallest pieces and the properties remain the same. Try the same trick using cows as a currency- splitting a cow in half tends to ruin the cow (but is great for a bbq).
Secondly, it is pretty rare, and hard to get. Which makes it ideal to use as money, politicians cannot inflate the supply at will. In fact, when FDR wanted to experiment with Keynesian deficit spending he had to confiscate everyone’s gold, abrogate private contracts (that specified payment in gold) and make ownership of gold illegal.
Third, gold does not rust or erode or otherwise become diminished over time. It also does not get consumed (don’t confuse “lost” with “consumed”). You could use wheat as currency, but it will eventually either rot or get eaten. Then where’s your money to buy that half cow you have been eying?
Silver is also good, but it does corrode and it is consumed in industrial applications. Almost all gold ever mined is still around (except for the lost stuff, even the gold foil they put into Goldschlager Schnapps. You may not want to go get it, but you could) but silver is disappearing.
I will admit that I sometimes believe the next currency will be Remington .223, with .22 LR being used for change.
Doesn’t mean gold will be worthless though…
Had this argument once before. Please see Depleted Uranium on the Battlefield by William Andrews, which I believe appeared in the March 2003 edition of the Journal of Battlefield Technologies:
That’s from the section on ballistic properties. The article is pretty comprehensive on the topic of DU in an armor-piercing capacity. I may be misunderstanding it, or quoting it out of context. If you think so, please advise.
that makes me want to experement with bullets of pure nobelium.
hummmm i wonder what that costs by the pound.
its got to be good if it was named after Alfred Nobel
Iridium and osmium are looking pretty good to me.
I may be misunderstanding it, or quoting it out of context.
You are.
In the 3000 m/s regime, we’re not talking about long-rod penetrators, we’re talking about explosive-forged projectiles and HEAT jets. In fact, the sentence immediately after the bit you just quoted reads:
In regards to long rod penetrators, it reads:
The author goes on to detail the differences in the material properties between sintered tungsten alloys and DU, and gives an example of how properties other than density come into play:
The author brings that line of discussion to a close by stating “…DU rounds can achieve the same penetration as WHA rounds at significantly lower velocities, meaning that the DU round remains effective against any given target to significantly greater ranges (up to about 50 to 70 greater).
That’s a much greater difference in effectiveness than just the slightly higher density would yield. For long-rod penetrators, other material properties than density factor into the penetration, and gold’s other material properties are very poor for this application.
After reading that, I have to say that I concur that gold isn’t suitable as a long-rod penetrator. I originally derived that quotation from a later paper of his that features the same information, plus more details about mutual erosion in the hyper-velocity regime where material properties other than density are less important. Unfortunately, I can’t find that paper online any more.
Kill two birds with one stone…
land, food, fuel, clothes, meds, ammo, guns, education, etc…then I think you should have ready cash available…and then, when all thats done, I think you should start salting a little bit of gold away…
Just take care of a couple at a time. Buy old abandoned gold mines for your land. Then spend the education money on learning to refine the ore. It can’t be that hard, people have been doing it for hundreds (thousands?) of years.
Besides those old mine shafts would be great for bunker storage… except for that ground water problem. Hmmm.
Too soft for armor piercing, but might work handily for those situations where over penetration would be a problem…
Do you prefer larger or smaller coins? There’s less deal mark-up with larger coins, but smaller ones may be more spendable after a currency collapse. Along those same lines do you set aside silver coins too?
The only things that are of any worth are those which preserve life (shelter, food, medicine, capacity to grow, hunt, store food, etc.) Barter will most likely return and gold returns none of these values. If one has valuable skills (capentry, hunting, farming, etc.), one will be able to procure just about anything one wants as long as it provides life. Then again, I’m planning on being on our own farm completely paid for and equipped in about ten years tops, so getting past checkpoints is a mute point.
I used to be big on the precious metals thing in which I believed they’d always have value (I still have quite a bit collected), but the truth is that all the rich man’s gold and silver will mean nothing if there is no food available for purchase. He would have fared much better investing in heirloom seed, stores of phosphate, and a built-in cistern with handpump.
To each one’s own, though.
OK< who let the physicists in?
Confidence in gold is misplaced. The precious metals exchange is a volatile market. My guess is most posters are too young to remember the gold price spike of 79-80. It hit $650 an ounce and it is currently trading at around $450 an ounce.
See Gold Prices for historical gold prices.
That was $650 in 1980 dollars. A trip to the inflation calculator at Inflation Calculator spits out that $650 in 1980 is worth a whopping $1650.78 in todays dollars.
So the value of gold has fallen in real terms to around 27% of its peak in 1980. So much for buying power staying roughly constant.
The price of gold is driven by 2 main factors. Speculation and industrial demand. Just think of all the gold plated connectors in high end electronics, be it in the home or in aerospace let alone its use as a doping agent on microchip manufacture. Jewelry and such is not a significant market driver so far as I am aware.
Given a collapse both of those market drivers will be removed and it is likely that the value of the gold will fall back to pre-industrial and pre-financial market levels.
Right now an ounce of gold would buy you a rifle from my safe. Come SHTF it would be many, many ounces since gold at that time gold has a low intrinsic worth. Its value will plummet, or alternatively those things that are essential to life and liberty will massively appreciate in value. Whichever way you look at it the buying power of gold will be massively reduced in comparison to the things you wish to buy.
I think some of you guys are missing the point. It sounds like CZ thinks, and I agree, that there are times in between the “gee, everything’s fine and I can use my credit cards” and “the world is ending and only practical barter items have any worth.” The first is where we are now and the second is the ultimate SHTF, but there’s ALOT of room in between.
Personally, I think a large stack of $20s (for easy exchanges in small amounts) and $100s (for the pscyh value of that large denomination) would be best for the first stages of a bad situtation. Keeping some cash on hand is also fairly easy to do as part of your planning and the cash can be readily converted to other immediate uses for other, non SHTF, short term finanical needs.
When that $100 starts declining in buying power through hyperinflation though is when Gold comes to play. Gold is not “fiat currency” due to it’s scarcity and would work well in a hyperinflation situtation. Past that, if all money based trading has ended and it’s a pure barter or “survival of the fittest” economy, gold will no longer be useful. That is, until things start to get better again.
Personally, I don’t have any gold. Can’t afford to tie up my resources like that on my income. But, I do keep a ready supply of cash on hand. I found it useful during that last big blackout when the ATM’s didn’t work.
Cash on hand is always useful. We also keep it on hand for power outages, snow storms and the like.
Gold and hyperinflation is very different. Hyperinflation is almost always associated with commodity shortages. In this case gold will not buy you what is simply not available. Alternatively what little of the commodity is available will be very costly even in gold terms, so can you afford it at that price. Throw into the equation that the US Govt holds $89 billion in gold stocks that they will use to attempt to control the market and you have a very chaotic situation that is very difficult to predict.
The fundamental mistake people make with gold is in thinking that gold = currency. Today gold = $450. About 1000 years ago a gold coin was a bushel of grain or a pig or 10 chickens or whatever. But a pig was also worth a bushel grain, so produce was also currency.
In the event of economic collapse, then once again a gold coin will be a bushel of grain or a pig, or a pig worth a bushel of grain. Hyperinflation is what happens in the middle, between the old paper currency backed by government promise and the new barter/gold standard currency that emerges from the chaos.
The situation will be very fluid as the markets settle on what the value of gold should be in terms of useful stuff. You could make a killing or you could lose it all. If you think you can predict what the market value of gold will be in that circumstance then good luck! Why not try making some money as a day trader to boot!
The real winners will be those that can ride out the storm without expending gold or anything else for that matter and then take advantage of the new stable standard of trade, whatever that is.
Gold should be the very last thing you think about in preparations. Once you own your land, have all your tools and stores and ability to produce food then you can think about gold. If you do not have the basics in place first then gold will not help you.
Ultimately gold can be a useful commodity but not at the expense of completed basic preperations.
I far too often see people thinking that gold can trump good preparedness, it can’t. It can be a very poor investment against currency hedges, see my point about the gold price spike. No better than the stock exchange in fact. Rely on it and you will end up chocking to death on it.
Wouldnt another reason for the increase in the price of gold in the early 80’s be related to the high inflation and lack of faith in the economy at the time? In the early 80’s inflation was much higher than what it was now and people were looking for a place to stick their money.
You are exactly right, they were looking for somewhere to put their money.
However with gold running at 27% of its 1980 value it turned out to be a less than wonderful thing to invest in to protect your investment. Would would currently get $270 back today for every $1000 you invested then in inflation corrected dollars. Many folks lost huge amounts of money on that gamble.
The germaine point that anyone should take away from this is what we take for granted in todays stability cannot necessarily be taken for granted in times of economic trouble, like hyperinflation.
Gold may be useful, but it is a huge leap of faith to say it will be useful.
I made another reply to trebor1415 which covers this.
Hyperinflation is almost always associated with commodity shortages.
I was under the impression that hyperinflation is almost always associated with ‘too much money’ in the economy..usually by means of a government printing it as they need it….and that commodities (and by that Im thinking you mean tangible goods) are snapped up to preserve the value of your rapidly deflating currency.
You are again right about the reasons behind hyperinflation. However the commodity shortages occur because the traditional banking means of paying for things like checks and electronic transfers are no longer considered trusted.
In the goode olde dayes when everything was pretty local and the village blacksmith could make any implement that you might need it’s not a problem. However the world we live in is far more complex.
Lets say your tractor needs some spare parts and they are up-country. You send your order by telephone since the local ISP hub had an equipment failure and he can’t replace it because of the inflation.
The tractor parts need to be driven down to you by truck. The guy sending the parts has no guarantee that you can pay. There is no credit system that works any more, you can’t write a personal check that is worth anything and the same problem exists with money orders and cashiers checks. Is this a setup he wonders?
Your paper cash is no use to him at this point since even if you promised 3 times todays paper money worth it may be a worthless transaction by the time he gets home to make use of it. You promise him gold. But how can he trust you? How can you show him you are as good as your word without a bank to back your promissory notes (which is what a credit transaction or check really is)?
And the oil shortages, oh the oil shortages. How do we buy oil with a devalued currency? We can’t as a nation trade tangible hard goods for oil since if we could the system would not have collapsed in the first place. So even if he did trust you enough to make the run for gold he is unsure he could make it back easily enough to make the run worthwhile. Heck, he needs the gas for his to deal with his own problems.
As a mental exercise over the next week every time you buy something think about how you paid for it. Then think – I just paid for this in gold, how does that gold work its way back to the original supplier? Remember – no banks because this is hyperinflation time. Think about that money trail and the logistics behind it and then try and solve it by having to move physical gold around.
The system will creak, grind and work after a fashion but you will always have local shortages of something or other. This has been shown again and again all across the world every time hyperinflation has hit. Expect it.