how much gold/silver?

[Erigorn]

I know the answer is depends but....
How much silver is a good amount?

Hypothetical situation:
no debt except the house
2 cars paid for and will last several more years
have somewhere between 6 months and a year of food/other preps

my goal is pushing to have 6 months of cash reserve to pay for mortgage, utilities, etc.
Food and other preps for 6 months to a year.
Then really start pushing the silver/gold reserve.

I am specifially looking to protect my wealth against inflation. My thought was to try and amass 10% of my remaining home loan amount in gold and silver for the scenario that high/hyper inflation hits and gold/silver reaches 10x its current price (due to dollar decreasing in value)

Any thoughts? (better places to put the money, arguement to pay off house debt instead, etc)

[endurance]

I think 10-15% of your savings should be silver and gold.  I also agree that a six month reserve of cash is a very wise thing to accumulate and retain.  I also think you should have one or more months savings cash in actual paper money, although not all in one place.

Picture a SHTF that took out the ability for banks to operate credit cards or ATMs for several weeks; cash would be king.  Even without something like that, say a hurricane took out the power in your community and banks aren't open.  Again, cash would be king.

Otherwise, the smart investments to me are things that save you energy or money over the long run.  New windows in your house that have a better R value, more insulation, better sealing doors, a more efficient (perhaps 12-24vdc) freezer, a wood burning stove, solar or wind power... They'll pay you dividends in the long run and also contribute to your self-sufficiency.  With the current price of solar, I put some extra cash into 800+ watts of solar panels this summer.  While I'm still months or maybe a year away from having the rest of what I need to hook it all up, I have locked up a store of value that will pay dividends for 20-25 years.

[Erigorn]

Some good points there.

Absolutely keep a couple of those months of cash on hand.

I would be well over 10-15% of silver/gold. It would be more around 50%. its a pretty high percent. Maybe i back off that a bit and invest in some of the energy savings/self sufficiency items like solar, wind, wood, etc. Thanks

[fritz_monroe]

I'm nowhere near the point where I need to worry about this.  But I know that Jack has said several times 10-15% in gold and silver.  50% is kind of high to me.  That seems to be betting on failure of the monetary system.  And while we all know it is coming, we don't know when. 

I do think that gold and silver could go on sale in the near future.  I think that the stock market is poised for a run up.  When that happens, I think that metals are going to drop.  I don't know how far, though.  If this happens, it will be a great time to get to where you want to be.

[Burton]

Sounds like a good plan. Being new to prepping I originally was going to do the same thing, hold off on the G/S till I had 6 months in the bank, but then I researched into gold prices post elections and most of the time they went up. So I jumped in and purchased about a months savings of silver to start off.

It is going to take me 6 months to save up enough for a 6 month buffer and that is if I don't spend any of it on anything. Which is highly unlikely as I still have preps to get so I have a feeling it might take 8-12 months to do, being single does have its' disadvantages as well

Then the worst part is, while I don't have consumer debt, I have a house which will never produce for me and I am stuck here at least till April. I am currently refinancing it so I can save an extra 200 a month but I really need to start looking for somewhere else I can buy outright. I haven't had an appraiser come by yet so I can only hope the property has retained or gained in value. 

Still a long way to go. Been trying to reduce me monthly expenses as well.

[flippydidit]

As Fritz mentioned, I also foresee a huge devaluing of precious metals in the near future.  It's actually one of the signs I'm watching to determine our "step off the cliff" into hyperinflation.  Major players hold precious metals as a hedge.  When they "screw up", they historically have liquidated metals (primarily gold) to cover margins, losses and to show liquidity.  It's quite a boon for many of us "average guys" that are preppers.  Their short-sightedness and size allows for them to drive markets down in large amounts at just the perfect timing we foresee needing to purchase.  A win-win situation for us.

For all of those that are squirming and anxious that they weren't able to buy metals at a "good" price when it was lower, I would encourage you to be patient.  Have the money to purchase set aside.  Your time for huge savings when the metals market gets flooded may not be too far off.

[Erigorn]

As Fritz mentioned, I also foresee a huge devaluing of precious metals in the near future.  It's actually one of the signs I'm watching to determine our "step off the cliff" into hyperinflation.  Major players hold precious metals as a hedge.  When they "screw up", they historically have liquidated metals (primarily gold) to cover margins, losses and to show liquidity.  It's quite a boon for many of us "average guys" that are preppers.  Their short-sightedness and size allows for them to drive markets down in large amounts at just the perfect timing we foresee needing to purchase.  A win-win situation for us.

I think i see what you two are saying. According to Jack's model and discussion about QE infinity. That the stock market will make a last big push upward due to 1)banks having to put the money they are getting from the FED somewhere and 2)a false sense of recovery that lures people into getting back into the stock market. When this happens some may pull from gold/silver since they used it as a temporary holding area while the market was bad or as you say having to liquidate to cover themselves. That drives the price down on gold/silver but also is a pretty good indicator that the cliff is getting close. That would indeed be a double win for those with money set aside to buy it up and the understanding on why.

I really have no clue about places using it as a hedge defense (if it will happen that way or if thats common or anything) my only arguement against the G/S market dropping is that if central banks and others are actively buying will the price still come down. I guess someone has to sell more/faster that someone else is buying to get the price to drop.

I know Jack posed the idea that being in certain parts of the market are ok right now but be ready to liquidate to hard assets. Is that to ride the wave of the market up but then get out into silver/gold when it has dropped. Sell high (in stocks) and buy low (in silver/gold/hard assets) Of course with warnings to make sure you are ahead of the crash.

What are you thoughts on how this will play out? I would love to hold off, work on other preps and get the savings in place now and then buy lower than it is today. I just keep worrying that the price is just going to go up as governments buy it up or others do as the market declines (not what Jack says but i consider it)

[endurance]

One thing to consider is what happened to the price of gold in 2008.  Here's a day by day pricing history for the year.  First their was a fear buying frenzy in March 2008 brought about by the failure of Bear Sterns and prices broke through the $1000 mark for the first time, peaking at $1011 on March 17, 2008.  But what a lot of people fail to recognize is that prices crashed nearly 30% during the peak of the financial crisis in November 2008 falling to a low of $713 on November 13, 2008.

A lot of people think that folks will run to gold in the fear of a financial crisis, but the other side that they don't think about is that major banks and large investors hold gold as a currency of last resort and if they have margin calls or a severe shortage of cash they sell their gold.  That's what brought the price crashing down in November 2008 and it's a history that could very well repeat itself.  That's why I'm a fan of maintaining some diversification in precious metals, perhaps even as much as 25% if you have an exceptional buying opportunity, but recognize that in a total meltdown when people are losing their jobs, losing their retirement savings, and losing the value of their homes, there are not going to be many buyers and there are going to be a lot of sellers just trying to raise cash.  That is the moment in time where it takes balls of steel and a pile of cash to step in and be one of those rare buyers.

Yes, it is definitely true there could be major inflation, maybe even hyperinflation, but there's a flip side to every investment.  I'd hate to be cash poor and have 50% of my assets in gold with the value of gold down by 30-40% from your buying price.  There's also some interesting scenarios brought up in the book Currency Wars that are worth considering.  One is the collapse of the dollar leading to the creation of a new gold-backed currency in which folks are taxed at 80-90% of the new value of gold to exchange for the new currency.

Just food for thought.

[Erigorn]

Wow, makes my head spin to think of all the scenarios. Thanks for giving me more to think about.

I think i'll be more conservative. Keep expanding the pile of preps that have a actual use (food, fuel, etc) and be a little less aggressive on the gold/silver. Pile up some cash as well and if prices do drop (many scenarios could cause it) then buy some more up if i have cash to spare at that point.

[Perfesser]

I too have a 6 month reserve of cash - 75% of it is in silver.

[Burton]

I too have a 6 month reserve of cash - 75% of it is in silver.

I thought the idea of a 6 months reserve of cash was to have it in cash, not physical assets? The idea being you can pay all your expenses if the need be for 6 months without an income. If the economy collapses your bills will still be due, and due in legal tender -- cash.

What scenario are you planning for by putting 75% into PM?

[flippydidit]

My assumption is that when this deflationary cycle transitions into hyperinflation, that "cash" will not be wanted by the debt collectors.  FRN's will be revalued daily or hourly, making it unstable for use as currency.

Example-
If the mortgage company is owed $1,000 on the 1st of the month, and you mail them a check on the 25th, by the time they receive it and process it, $1,000 may only be worth $100.  The same may be true if you pay in "cash" at the bank.  You walk into the bank with $1,000 on the first and they say, "The value isn't there, so you owe us current value at $10,000".

My response would be to request that they take silver as payment.  If they decline, I would choose to "miss this month's payment".  It's likely that you wouldn't be the only one.  It's extremely unlikely they could foreclose on EVERYONE.  Somewhat like a reverse bank run.  I'd imagine that "alternative" methods of payment would be accepted rather quickly.  Especially considering you would be one of the few that has the means to pay at all.

That would be my primary reason for being "precious metals heavy" on investments.

[fritz_monroe]

But once you are in the contract to pay $1000 in U.S. dollars, it doesn't matter what happens to the value of the dollar.  You still owe $1000 in FRNs.

Now if the dollar is re-valued, that's a different story all together.  If they revalue and say $10000 in FRN is now worth $10,000 in NSC (new space credits) and you refinance your mortgage, it would now need to be paid as $1000 NSC or $10000 FRNs. 

Along the same track, it the dollar is revalued they could tie the NSC to metal.  They could say that 1 ounce of silver is worth $20 NSC.  That's where they could steal the value of your silver.  Your silver that just would sell for $3000 FRNs, is now worth only $20 NSCs.  They have effectively stolen $1000 FRN value from your silver.

At least that's my understanding.  I could be WAY off here.

[endurance]

But once you are in the contract to pay $1000 in U.S. dollars, it doesn't matter what happens to the value of the dollar.  You still owe $1000 in FRNs.

Now if the dollar is re-valued, that's a different story all together.  If they revalue and say $10000 in FRN is now worth $10,000 in NSC (new space credits) and you refinance your mortgage, it would now need to be paid as $1000 NSC or $10000 FRNs. 

Along the same track, it the dollar is revalued they could tie the NSC to metal.  They could say that 1 ounce of silver is worth $20 NSC.  That's where they could steal the value of your silver.  Your silver that just would sell for $3000 FRNs, is now worth only $20 NSCs.  They have effectively stolen $1000 FRN value from your silver.

At least that's my understanding.  I could be WAY off here.

Anyone who has held onto a home for the last 20 years and not re-financed into a 30 year loan to get cash out has seen the first scenario in play.  I bought my first home in 1990 and oh how I wish I could have that $614/month PITI payment back as the value of the dollars I was paying it off with dropped over the last 20 years.    Hyperinflation would do the same thing except, as you said, in the case of a revaluation of the currency. 

The other possibility is sector deflation with inflation in other areas of the economy.  There could be a situation where high unemployment leads to a high foreclosure rate which leads to deflation in the housing market while at the same time you see an increase in the costs of food and energy.

I also recall learning about the banks calling in the notes on mortgages during the Great Depression.  In a desperate move for cash they'd tell the home owner they needed payment in full or they'd take the property.  I don't know if there are laws to prevent such transactions now or not and I don't see how the banks would benefit from such a move since it would lead to a surplus of homes for sale on the market, thus further bringing down the value of their assets, but it's yet another thing to think about.

[Alan Georges]

Recently I saw this one economist's answer to the perennial "how much physical silver should I have?" question.  His short answer is something in the range 1.4 to 4.5% of your net wealth, with a "just give me one number" mean of 2.1%.

His complete answer is at http://captaincapitalism.blogspot.com/2015/08/precisely-how-much-silver-do-you-need.html – beware, foul language and a generally pissy attitude at that site.  He makes a lot of suppositions and assumptions in his analysis, just because there's no other way to do this calculation otherwise.  He discusses those problems there, hence the range given.

I think his main point was to show that a small handful of pre-64's won't get it, but there's no reason to go 100% in either, and something in the a-few-percent range is right.  It is interesting that he's come reasonably close to Jack's standing recommendation of 5-10% of your net wealth in PMs.

[Bonnieblue2A]

.....................snip..................................

The other possibility is sector deflation with inflation in other areas of the economy.  There could be a situation where high unemployment leads to a high foreclosure rate which leads to deflation in the housing market while at the same time you see an increase in the costs of food and energy.

I also recall learning about the banks calling in the notes on mortgages during the Great Depression.  In a desperate move for cash they'd tell the home owner they needed payment in full or they'd take the property.  I don't know if there are laws to prevent such transactions now or not and I don't see how the banks would benefit from such a move since it would lead to a surplus of homes for sale on the market, thus further bringing down the value of their assets, but it's yet another thing to think about.

Those old enough to remember the inflationary Carter- early Reagan economies will remember home mortgage interest rates up to 18%.

As to the latter point about banks/mortgage companies calling in full payment due,  this is why it is very important to read the small print on the mortgage contract.  Being late or delinquent in payments may place one in the situation of having violated their mortgage contract and the bank/mortgage company may have every right to call the loan in its entirety given the presence of certain criteria.

In regard to silver/gold.  I suggest that silver is not as universally accepted as is gold.  Some silver is good but gold is more likely to be accepted.  It would be important to research currency collapses in other countries to see which form was the most widely accepted.

Personally, I think the next major currency collapse will be the catalyst (possibly intentionally) for the destruction of cash altogether and the central bank institutionalization of digital currency.  The college generation now has more affinity for digital payments over cash or traditional plastic credit cards.  It is not if but rather when.....

When that time comes, will our gold and silver put back for insurance be worthless for exchange outside of 'blackmarket' barter?      

[Alan Georges]

In regard to silver/gold.  I suggest that silver is not as universally accepted as is gold.  Some silver is good but gold is more likely to be accepted.  It would be important to research currency collapses in other countries to see which form was the most widely accepted.

Hm, I've always assumed the opposite of this, but never really checked deeply into it.  I wonder what Selco and Ferfal's takes are on this?  Probably something along the lines of "7.62x39 better yet."  I'm going to dig around on this question.  It seems though that pre-'64 silver would be the most instantly recognizable and tradable form, being both familiar and in convenient denominations.  At least, you could say I'm hedging my bets that way.

When that time comes, will our gold and silver put back for insurance be worthless for exchange outside of 'blackmarket' barter?      

I fear that this may be all too true.  If it gets that bad, I'll see you down at Black Market Square.

[ncjeeper]

Those old enough to remember the inflationary Carter- early Reagan economies will remember home mortgage interest rates up to 18%. 

Yea I remember. Only because my basic savings account at the corner bank was paying 6% interest thanks to those high mortgages.

[Alan Georges]

I wonder what Selco and Ferfal's takes are on this?

After some digging around on their respective web sites, two definitive answers emerge: "It's complicated" and "It depends."  Here are the most relevant posts that turned up:
http://shtfschool.com/trading/on-buying-gold-silver-for-survival-preparedness/
http://shtfschool.com/trading/trading-101-for-long-term-survival-scenarios/
http://ferfal.blogspot.com/2015/06/what-to-do-with-goldsilver.html
http://ferfal.blogspot.com/2009/03/scrapjunk-gold-as-post-shtf-pocket.html

My take-away from all that is that small-denomination, easily recognizable quantities of silver may be useful.  After that, it's a question of niche uses like the "transiting through Casablanca" scenarios, or preserving wealth across economic singularities.

[alan123]

Yea I remember. Only because my basic savings account at the corner bank was paying 6% interest thanks to those high mortgages.

I was getting 12-14% on CDs if I remember correctly.

[Tyler Durden]

It seems that although this would be a good time to buy silver (spot price around 14.50 a ounce), that on APMEX, silver eagles are selling at $4.29 to almost $6.00 over spot.  It's been explained to me on this forum as to why that might be, but it still seems to be not the best value.  It would appear that as the price of silver continues to fall, minted coin prices have hit a floor.

[Carl]

I would not buy metals unless I already had a good supply of all the tools/food/weapons/etc that I may need.
When you use metals to barter for things you need, you wind up paying more for the items.
Buying metals ...you pay more than the value and when selling (in good times) you get less than the value.
When bartering ,you wind up bartering more value for the things you need.

I believe in metals ,but the investment is a bet against the value of money and good tools /weapons/food always
go up in price...even in good times...

Just my grumpy old man's opinion.

[Max]

It seems that although this would be a good time to buy silver (spot price around 14.50 a ounce), that on APMEX, silver eagles are selling at $4.29 to almost $6.00 over spot.  It's been explained to me on this forum as to why that might be, but it still seems to be not the best value.  It would appear that as the price of silver continues to fall, minted coin prices have hit a floor.

If you buy generic rounds and bars the premium is lower, $3.00 today and lower if you buy large quantities, but I don't know if the physical "out the door" price has hit a floor yet. Right now there is huge demand for physical silver but the paper market drives the spot price. The physical demand is what is keeping the premium prices/spread high. If the physical demand was not so high generic rounds and bars would have around a $1.00 premium. It honestly could get to the point where the premium is equal to the spot price (so if spot was $10 and the premium is $10 you would pay $20 for a 1oz round)  before the system breaks/paper market implodes, or explodes depending on your point of view.

[mgw44]

Fast forward to today and generic silver rounds are selling in my area for $1.00 over spot.  Silver Eagles are $3.00 over spot.  Seems like a great time to add silver.

[Carl]

If you have adequate quantities of EVERYTHING ELSE as metals are only a method to save,not a method that will likely save you.
Is your stock of everything you need or might need to that level??  Metals is an effective means of maintaining a monetary value though
it has little else to offer,look at your home and it's payments and see how much advantage you would get by early pay-off of the loan and
what advantage you would get during a 'personal' emergency,like loss of health or work when your house is paid for? Plan for your families
future ,not the end of the world ...a pile of silver must be sold and often taxed,before you can use it .

Just my opinion as I do have metals though they are not always the best option.

[mgw44]

I hope to never use the pm's I buy. If all stays well it will go to my children.  That strategy does not get taxed

[Mastoo]

Regardless of the ups and downs, picture that gold/silver drop 30% overnight with newsies all announcing the drop will continue. If you think you would panic and sell all, then you've got too much. Ups and downs happen and you shouldn't own more than you are comfortable with. Luckily I personally have a fairly high comfort level with owning them.

[Carl]

I hope to never use the pm's I buy. If all stays well it will go to my children.  That strategy does not get taxed

I don't know every state's or Federal taxation but my state is about 43% and I have found a life insurance/trust that is NOT TAXED when cashed in by survivors is one way of not having so much of your life's savings go to taxes. I am not an investment broker though and ,if interested,you should look into this option.