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#142488 - 08/01/08 03:28 PM Precious metals?
Art_in_FL Offline
Pooh-Bah

Registered: 09/01/07
Posts: 2432
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.

Originally Posted By: AROTC

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_investment
Also 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.


Originally Posted By: wildman800
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.htm

If 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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#142619 - 08/02/08 05:36 PM Re: Precious metals? [Re: Art_in_FL]
BobS Offline
Old Hand

Registered: 02/08/08
Posts: 924
Loc: Toledo Ohio
I have always thought that purchasing precious metals to use for trade goods was not a good idea. If you canít eat it, use it for heat, use it to keep surviving itís no real value to me in a survival situation. How would you make a trade with it? 1 oz is $1000.00 Even if the person believed your 1-oz was in fact 1-oz of gold that would be a lot of trade goods he or she could use to survive just to give up for a coin sized piece of metal that had no value till a social structure (the money market) was restored.

100 pounds of food and a Coleman (or even a Hobo stove and some twigs) stove and a $30.00 tent is worth more then 100 pounds of gold. In almost every survival situation I can think of there is no way to buy things and turn that gold into food or supplies. Gold is only worth something because the market says it is, no market, itís not worth more then lead. Once the market gets restored or it becomes available to you, gold then is again worth something.


How would you buy food right now with everything up and running fine (or what passes for fine) you canít take your 1-oz gold coins or bars and buy clothes, fuel or food. My guess you have to send it someplace and have it tested and once the test confirm itís gold (Iím sure this takes time) then sell it and possibly the buyer will want to test it again himself, then issue you a check or money transfer. I could see it taking weeks or even a few months to sell a few ounces of gold and actually have cash in your hand to buy things.




I can see gold and silver for future hedge on the US economy going south somewhat, As long as there is some kind of structured economy itís going to allow you to buy things once you go through the time consuming sales process. I also see that some would use it for a retirement nest egg and it would work for this as there is no immediate need for money here. Personally I think there are better things then gold for this.

I donít see societyís complete failure as a big concern as I think itís a very remote possibility despite Hollywoodís love for it in the movies. But if there were ever a complete collapse of society, gold becomes a very heavy thing to lug around and will have tied up a very large amount of your capital that could have went other places.





_________________________



You can run, but you'll only die tired.


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#142628 - 08/02/08 10:59 PM Re: Precious metals? [Re: Art_in_FL]
ironraven Offline
Cranky Geek
Carpal Tunnel

Registered: 09/08/05
Posts: 4642
Loc: Vermont
Agreed. In a military SERE kit, particularly if you might be able to buy your way out, it might have a place. But USDs and Euros will probably work to.
_________________________
-IronRaven

When a man dare not speak without malice for fear of giving insult, that is when truth starts to die. Truth is the truest freedom.

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#142629 - 08/02/08 11:38 PM Re: Precious metals? [Re: Art_in_FL]
OldBaldGuy Offline
Geezer

Registered: 09/30/01
Posts: 5695
Loc: Former AFB in CA, recouping fr...
The only gold we have, or care about, is our wedding rings. Fact being stranger than fiction, it was also my dad's ring. And my wife is wearing my mom's wedding rings...
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OBG

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#142633 - 08/03/08 01:27 AM Re: Precious metals? [Re: OldBaldGuy]
Art_in_FL Offline
Pooh-Bah

Registered: 09/01/07
Posts: 2432
Originally Posted By: OldBaldGuy
The only gold we have, or care about, is our wedding rings. Fact being stranger than fiction, it was also my dad's ring. And my wife is wearing my mom's wedding rings...


IMHO, and obviously a minority in some circles, I have always thought that simple gold wedding bands showed more class and seriousness than any of the gaudy and overbuilt rings I have seen. It always makes me think they are covering their doubts by doing too much and going too far. Often a sign of an impending failure.

Being generally well informed your probably well aware that up until the 40s diamonds were a very small specialty market and most Americans didn't own any. That the popular view of diamonds as glamorous was a result of a Madison Avenue marketing campaign paid for by De Beers.

The link between diamonds and sex, diamonds as proof of love and commitment, the idea you prove your seriousness by offering a ring priced at three months of income are all straight out of this advertising campaign. The famous lines "Diamonds are forever" and "Diamonds are a girl's best friend" were inserted into the popular consciousness by movies and advertising under the direction of a marketing firm.

It is interesting how ideas can be manufactured, pushed and, in time, become part of the popular world view while the public simply forgets that the idea was part of a marketing campaign designed to sell a product for which few have any real use.

I don't wish to be too negative about precious metals or gemstones as an investment or hedge against inflation. As long as everyone is well aware of the mechanics and risk, independent of the marketing, hype and mythology, I have no problem with people getting into these areas.

What bothers me is the idea that somehow gold, silver, diamonds, what have you, are independent from and immune to the same market forces, manipulation, hype and mythology that all other markets are subject to. That if you Google gold or silver you get thousands of sites, almost all created by people selling these materials and gushing with enthusiasm, telling you that precious metals and gems are great investments with little risk or down side.

That you have to really dig to find any mention of the risk, an even-handed discussion of these materials being subject to market forces that can be manipulated, that prices can both soar and crash, the methods and risk of fraud in the market, or anything that questions the ability of a person to get their investment out without getting sunk by fees or depending on syndicates and major dealers.

In my experience any market where enthusiasm for getting people into it greatly exceeds the documented ability to make a profit and get out of the market is a dangerous sign of instability and a possible crash. Biomed, high-tech stocks, savings and loans, real estate, financial services, and many others followed this pattern. In my experience when a great majority are pushing an investment as a sure thing it is a very good time to stop, and think long and hard about running the other way.




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#142635 - 08/03/08 01:39 AM Re: Precious metals? [Re: Art_in_FL]
wildman800 Offline
Carpal Tunnel

Registered: 11/09/06
Posts: 2828
Loc: La-USA
Anytime a "sure thing" is being advertised on radio and/or TV, one can be assured that a sucker's bet is being played on all who are gullible enough to bite!
_________________________
QMC, USCG (Ret)
The best luck is what you make yourself!

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#142637 - 08/03/08 03:02 AM Re: Precious metals? [Re: Art_in_FL]
OldBaldGuy Offline
Geezer

Registered: 09/30/01
Posts: 5695
Loc: Former AFB in CA, recouping fr...
Speaking of diamonds, long long ago I was engaged to the wrong girl. I got the ring back, and, being in the service and short of cash, I took it back to the high end jewlery store where I bought it (paying much more than I could afford, they shamed me into it), hoping for some bucks. The same guy who sold it to me, looking down his nose, informed me that "we don't buy used diamonds." Then I went to a pawn shop. What they offered was a joke. So my daughter now has the set...
_________________________
OBG

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#142660 - 08/04/08 12:19 AM Re: Precious metals? [Re: OldBaldGuy]
Art_in_FL Offline
Pooh-Bah

Registered: 09/01/07
Posts: 2432
Originally Posted By: OldBaldGuy
Speaking of diamonds, long long ago I was engaged to the wrong girl. I got the ring back, and, being in the service and short of cash, I took it back to the high end jewlery store where I bought it (paying much more than I could afford, they shamed me into it), hoping for some bucks. The same guy who sold it to me, looking down his nose, informed me that "we don't buy used diamonds." Then I went to a pawn shop. What they offered was a joke. So my daughter now has the set...


LOL.

It is always revealing to see a salesman, who was just a day before overflowing with assurances about how what he is selling such a grand investment and worth so much more than what he is charging, turn around and announce how much he will offer you to buy it back.

Like comparing how she looked last night with a belly full of beer to what she looks like in daylight. A ten last night turns into a four in the morning light.

The toy that looked so exciting on the TV. The one your kid claims he can't live without. The one 'all the other kids have'. It holds their attention for about ten minutes and then gets stuffed into the back of the closet. Where it resides until its final disposition in a garage sale or riding off to the dump.

Humans are easily influenced. The facts can be smeared through misrepresentation and selective addition of other facts or falsehoods. The criteria for judgment can be shifted. The thought process itself is subject to editing and revision. Advertising and marketing are billion dollar industries that wouldn't exist if this wasn't true. The same is true of political lobbying and the propaganda industries. All are in the business of 'shaping' perceived reality.

Nowhere is this more shockingly obvious than when you try to sell what you just bought. The fog of hype, enthusiasm and pretty pictures evaporate and the real value emerges. What you bought yesterday often goes for half that price today. Ouch.

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#142687 - 08/04/08 02:46 AM Re: Precious metals? [Re: Art_in_FL]
BobS Offline
Old Hand

Registered: 02/08/08
Posts: 924
Loc: Toledo Ohio
What you bought yesterday often goes for half that price today. Ouch.





Ben Dover.
_________________________



You can run, but you'll only die tired.


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#142700 - 08/04/08 03:41 AM Re: Precious metals? [Re: Art_in_FL]
OldBaldGuy Offline
Geezer

Registered: 09/30/01
Posts: 5695
Loc: Former AFB in CA, recouping fr...
"...turns into a four in the morning light..."

If you are lucky she is a four. Ever hear that song about waking up with a number one??? Coyote ugly we used to call them...
_________________________
OBG

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