This thread started under the "Diapers?" thread which drifted into the subject of trade goods in general and precious metals in particular. Some of this post is a reposting of what was said there but with a few clarifications and expanded upon. Precious metals are a subject that often crops up in survival discussions and one that seemed to deserve its own thread.
Ten twentieth-ounce gold coins can buy a lot of good will for a traveler. That's less then an ounce added to your pack weight, but it could reward you more then a similar weight of any other tool.
Show up on my doorstep with little slips of what you say is gold, and fine gold at that, and I will value it as I would any fishing sinker. Show up with what you say are silver coins and I will give you the face value.
It would be imprudent to do otherwise. Because, in the end, how do I know it is really gold. There are several modern metals that look remarkably like gold. How do I know its purity? How do I know the current market value of gold if communications are down? For all I know gold went to $10 last night.
Some testing shows that presently a lot of the jewelry getting sold as high concentration gold are much less pure than marked. A very old trick that is hard to detect even in peaceful and well ordered times. People get desperate and you can be assured frauds will proliferate.
All that is even more true of silver where look-alike materials are more common and both testing and purity is harder to check.
A metals dealer can effectively test what your offering to make sure it is what you say it is and the purity marked. They have the test kit (appropriate reagent, scratch stone and comparison needles) and can draw strong conclusions. I would be guessing. So, to protect my investment and material goods, I would give you a much lesser fall back offer. Take it or leave it.
Of course buying precious metals has been pushed hard by people dealing in, or invested in, such materials. Which raises the price and becomes a self-fulfilling prophecy of increasing price.
A rundown of silver investing:
http://en.wikipedia.org/wiki/Silver_as_an_investmentAlso look into the link to "Silver Thursday" and The Hunt brothers who tried to corner the silver market.
This is not much different than real estate. The truth of markets is that everything it worth what someone will give you for it. And, for some, anything worth doing is worth cheating at.
I wouldn't be sure what your offering is what you say it is. And even then I really have no real direct and practical use for gold. So the price I'm willing to pay will be quite low.
Like travelers in hard times before noted you may be better off offering your labor and/or skill set to get what you need.
I prefer silver rounds. They are 1 troy ounce of .99pct pure silver and those specs are stamped onto each coin. When I buy them, I pay the current price for an ounce of silver plus a $1.50 handling fee per round to the coin dealer.
First, according to the spot check on the NY market silver is at $17.56 as of 1000 on 08/01/08. Which means your $1.50 handling fee is better than 8% (8.54% actually) of the current price of that round. From a purely financial standpoint, and seeing as that if you turned around and sold it back your likely to lose another 8%, by buying that silver your about 16% behind the power curve to start with. While there have been peaks in the middle the one-year increase in silver has only been about 4$, roughly 22%, and trending down over the last few months.
Just as comparison a good sized stock purchase can be had for about 3% of the purchase price. Much less if you buy in larger quantities and go with a broker that charges not on the size of the purchase but on a flat-fee, per transaction, basis. Then the transaction will run you between $5 and $25, depending on the details, regardless of size.
That doesn't mean your wrong to buy it. Not if your keeping abreast of these figures, are fully aware of the risks, and have incorporated all this into your wider strategy. I'm sure your aware of all of this but a lot of people are getting into the precious metals market without being aware of the costs of transactions, the simple fact that, as with every other market, prices can go down, and often it is the middle men who profit most in both selling and buying.
Second, whereas those rounds are marked as 99% pure that may not mean as much as it seems. Unless your willing to have each piece tested for purity, a process that may cost more than the price of the piece itself for a detailed analysis, your really depending on the reputation of the dealer.
Any good sized jeweler can economically recast precious metals, and, if they were inclined to steal, make a good bit on profit in the process. It is simple enough to add base metals to the mix and make a quick profit on people buying misidentified precious metals.
This is not new. The risk has been with mankind for thousands of years. The biting of gold coins, a practice that predates Christianity, was a crude but effective way of testing a gold coin for purity. Pure gold is quite soft and a tooth will make a substantial mark on it. Alloyed gold is typically much harder and the mark will be much less pronounced.
Silver, because of its lower price, is not a major target for this sort of small-time fraud. Gold, on the other hand, can be quite profitable to recast. Even more so when the risk is low because transactions can be made over the internet and completed through the mail. Web sites and dealers can come and go very rapidly. Finding out your stockpile is less than it seems can be frustrating when there is no way to seek redress.
My point here is to point out that even if the coin, round or ingot is clearly marked there is no really simple way to make sure it is what it seems to be. For now, a relatively settled time, counterfeit metals are a real problem but not one often talked about. For now the faith and confidence in reputable dealers, and their assurances that they wouldn't resell anything less than what they claim, even if they get burned occasionally, is enough of a reassurance that the markets stay happy.
This reassurance working against the long history of remelting precious metals and rumors that there are large numbers of sophisticated remelters in the middle east, Thailand, and India.
An interesting note claiming some people are finding that their silver is such a poor fraud that it is magnetic:
http://www.urbansurvival.com/ld2000.htmIf they can get away with selling silver stuffed with iron, enough to make the piece attract a magnet it makes me wonder about how many rounds and ingots are slightly more sophisticated frauds. It is stamped .999 pure but if it was only 80% would you know?
What if a good proportion of the assumed pure gold and silver that has been stockpiled is shown to be much less pure than advertised. What if the large dealers were aware of this and seeking to monetize their losses, and lock in their profits, by getting the small investors, who are less likely to have their purchases assayed or ask difficult questions, into the market. Generally, the the more something looks like a sure thing and small investors are being pulled into a market the more likely the market price is to be shown to be based on fraud and the more likely the market is to crash.
Gold and silver are not immune to these trends. Fraud in precious metals has been a problem for thousands of years. It is interesting to see that modern investors in precious metals have seem to be less aware of this. They are not certainly risk free even in well regulated markets and settled times and I think it is fair to say that in the event of a protracted major economic calamity and disruption of civil society we could see a breakdown of confidence in precious metals and the ability to use them for exchange.
Let the buyer beware.
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