Disclaimer: I've since updated my thesis and no longer recommend buying as much gold or silver. I sold most of my gold to buy Bitcoin, though I do still have some silver.
Today I cover some of the basics of gold and silver bullion and why you may want to add some to your long term wealth preservation strategy.
I hope by the end of the article you understand how not owning gold and/or silver may be one of the biggest mistakes of your life.
Let's get to it.
What money is and isn't
Gold and silver have been the primary forms of money throughout history.
The reasons they have stood the test of time are their transportability, they are hard to counterfeit and produce (thus limiting supply), hard to destroy, and you can hold them in your hand.
You want to own gold and silver because it is real money, whereas the dollar is a fiat currency. I'll do my best to expand on this below.
A good way to think about owning precious metals is as insurance against inflation and the negligent government that keeps printing money.
The second way of thinking about owning precious metals is the optionality it gives you as maybe being one of the best investments of your life if you hold them when the dollar collapses.
Precious metals are considered a "hedge."
Gold is referred to as a safe-haven asset because it serves as protection against inflation. If you keep $100 in your bank account, inflation takes an average of $3-$5 out of your buying power every year. After ten years, you'll be lucky to have $50 worth of buying power from that $100 you kept in the bank.
Inflation is the expansion of the money supply via printing more fiat and is a tax on the public that no politician ever talks about. It is the result of our entire debt-based fiat currency system.
And it makes complete sense that a government would want to print fiat dollars. Think about it; what is easier for a government to do—balance a gigantic and complex budget or type in a few keystrokes on a screen to inject new dollars into the system?
It is no surprise that governments hate the gold standard because it forces them to act fiscally responsible. And since politicians like to make big promises and give handouts in exchange for votes, a fiat system based on debt allows them to do this without any constraints, whereas a gold-backed or bi-metal based monetary supply keeps them from doing so.
Since its advent, the U.S. dollar has lost over 99% of its purchasing power—$100 today buys what $1 did in the early 1900s.
This massive Ponzi scheme has been going on for years, mostly because America got the rest of the world addicted to dollars through its reserve currency status.
This means the US can print dollars at home then use those dollars to buy things from other countries. The US pays its debts with currency it creates out of thin air.
The only reason countries even take this is because they do the same thing!
When it all comes crashing down—and it will—the average person is going to be hurt the most.
It's become so ridiculous that many believe the COVID 2020 hysteria is a smokescreen that gave the FED license to print trillions of dollars in a last-ditch effort to save the economy. Many believe the dollar has been at a precarious ledge for a while now, and the trillions just printed is propping it up.
This fiat system is Frankenstein; it can't be controlled or put back in the box. It is going to keep rampaging around unchecked until it collapses. At that point, the U.S. government—and the whole world—will be forced back to a gold or bimetallic (gold and silver) standard.
When this happens, there will be massive deflation. Billions of people on Earth will go through hardship. Millions upon millions will starve. It will be painful. And it may end up being the best thing that could happen to our world since it will stop the blatant theft of wealth transferring through the controlled money supply.
Wars are fought with fiat dollars. The wealth gap is fed with fiat dollars. The powerful control the masses with fiat dollars.
Everything wrong with America is connected to fiat dollars
If we go back to a gold standard, to sound money, we give the rest of the world a fair and level playing field, and we slow the massive wealth transfer while stifling the power of those that pull the strings. All good things, I'm sure you'd agree.
In a fiat system based on debt, unfairness is baked into the system. A return to precious metals would help bake fairness into the system, and that's exactly what we need so these elite can stop manipulating our money and government and lives.
Where we are in 2020
In 2020, we are at unprecedented numbers of debt and government deficit.
No one argues that this system is sustainable. Politicians ignore it since it's become a way of life for them, and most people don't even think to ask.
It will eventually come down, and when it does, governments will be forced to go to a gold or silver standard (or possibly a bitcoin-backed standard). When this happens, holders of gold and silver will benefit tremendously.
Governments have been buying up gold for years, even though there is no mandate forcing them to do so. Do you think that is a coincidence? I think not. The elite are just preparing for the eventual correction.
Some say this will be the greatest transfer of wealth in history.
How the dollar loses its value
If you purchased $100 of goods in 1920, it would cost you ~$1300 in today's dollars.
If you held 1oz of Gold in 1920, you'd have spent $20 to acquire it, and it would now be worth $2000.
Most people accept that prices rise every year, and that's just the way things are, but it's not how things are supposed to be. Rising prices are a result of the constant printing of fiat dollars that inflates the money supply.
If you held that 1oz gold coin you bought in $1920 for $20 dollars, you would have preserved your purchasing power. After all, $20 dollars bought a lot back then.
Real money maintains its value over time. Fiat dollars lose their value over time.
The Federal Reserve and our broken fiat system
Here are a few facts about the Federal Reserve that most people don't know:
- The greatest period of economic growth in U.S. history was before the FED existed.
- Inflation was not a problem in the U.S. until the FED was created.
- The value of the dollar has declined by more than 95% since the FED was created.
- The FED issued over 16 trillion dollars of secret loans to big banks during the last financial crisis.
- The wealth gap has increased exponentially during the FEDs life.
- The FED is a private bank that issues stock and dividends to the member banks. Hmm.
- The U.S. Constitution states that only Congress has the authority to coin money. Yet the FED has a sneaky way around this since it only issues debt or numbers on a screen.
- The Founding Fathers knew the dangers of a centrally controlled money supply, which is why they wrote in the constitution that only gold and silver coins could be a Tender in Payment of Debts. Congress has upheld the government's ability to create pape dollars.
The fiat system is not sustainable
"A study of 775 fiat currencies produced by DollarDaze.org states that there is no record of a fiat currency that has succeeded in holding its value over the long term. Twenty percent or 155 of the fiat currencies examined failed through hyperinflation, 21% were destroyed by war, 12% destroyed by independence, 24% were "monetarily reformed," and 23% are still in circulation approaching one of the other outcomes." From here: J.M. bullion
Fiat currencies cannot hold their value. This is a first principle of fiat currency.
The reason this is the case comes down to the issues with government in general and the fact that humans cannot be trusted to manage complex systems effectively, especially when there is personal agenda at play.
What happens when these currencies fail?
People flee to Gold and silver; they escape to real money. This forces currencies to return to a gold standard with a new currency backed—redeemable by—physical gold and silver.
You won't find anyone intelligent telling you a fiat system is sustainable. So most of the experts end up arguing about when the reckoning will happen, not if it will happen. (Though there are many college-trained "experts" that have no clue how money actually works thanks to their higher education indoctrination. Ignore these useful idiots.)
Your strategy for precious metals
Based on what we've covered this far, you want to own gold and silver as a form of insurance, wealth preservation, and possibly if things go haywire, one of the best investments of your life.
These hard assets:
- Are owned and controlled by you
- Cannot be inflated or deflated by a third party
- Cannot be replicated or reproduced without great cost (keep them stable in their scarcity and expected supply)
- Will be recognized as money anywhere you go
- Represent insurance against a currency crisis
- Will do "very well" in a worst-case scenario and quite well over time for as long as we live in a fiat dollar system
- Protect your wealth
The amount of all gold mined in history could fill about three Olympic size swimming pools.
The difficulty of getting it out of the Earth is a feature that makes it great money.
You can't destroy it. You can melt it and reshape it, but that's it—another important feature contributing to the "hardness" of gold as money.
Gold and silver also have the longest track records as money.
Gold specifically has some industrialized applications, with only about 10% of gold production used for industry and jewelry.
Silver, on the other hand, has over 10,000 industrial uses, with 50% or more going to industry use each year. (Some believe this will make silver more valuable in the years to come.)
People and governments recognize gold as money and are likely to continue doing so for years to come.
- 1-ounce gold can be hammered into a sheet covering 100 square feet
- 1 ounce of gold can be turned into a wire 50 miles long
- You can eat gold and inject it in your body
- Gold nanoparticles are used in many pregnancy test kits.
Silver is a complicated topic. You find people on all sides.
Some silver stackers believe silver is a better metal than gold and that it will eventually surpass gold in value.
(I sure hope so.)
Here are some facts about silver.
The price is manipulated and has been for years (some suggest this is why the price has been so low relative to Gold for years
There is silver to gold mining ratio of about 8:1. This means that there are 8 ounces of silver for every 1 ounce of Gold brought out of the Earth each year. This is often viewed as how prices should be set, which is called the silver to gold ratio. This ratio is based on how much silver does it take to buy one ounce of Gold.
Some people believe that the mining ratio should be equal to the price ratio. A smaller subject of bullion proponent believes this number should be closer to 1:1 since silver is more widely used, and so much of it ends up in a landfill as industrial waste.
Nearly 50% of silver is used for industrial applications. Compare that to gold's 10%, and you see that silver has far more physical use than gold, which could help drive up prices if supply becomes an issue when people flood to silver and gold in a currency crisis.
Here are some interesting properties of silver:
- Second only to oil for its industrial use prosperities, some call silver the king of metals
- Silver has been used as money more than gold throughout history
- Judas was paid between 15-30 silver pieces for betraying Jesus
- Silver is the most malleable metal. You can turn one ounce of silver into a wire 8,000 feet long.
- Silver bearings are used in jet engines over steel for added safety
- There are more patents issued around silver use than all other metals combined
Most industrial silver ends up in landfills due to the cost of extracting such a small amount from waste. This would undoubtedly change if the price were to skyrocket.
Throughout my precious metals journey, I've sought out gold in my mind more than silver before I started doing more research. Now I own a bit more silver than gold. I like to own both and since I believe silver is undervalued as I write this in 2020, which is why I'm spending more of my fiat dollars on the white metal
The thing about silver that is I believe it will take a significant financial meltdown before it reaches its true potential. It can rise in value in the interim, and you could make some profits from its speculation, but it is more volatile than gold generally. I'm personally only interested in having silver hit $500+ an ounce so I can then convert my holdings into real estate.
An EXIT strategy for precious metals
My exit plan for my precious metals is to convert them to real estate and/or cash-producing businesses.
Ideally, this will happen during a great market reset, which will likely see precious metals skyrocket relative to real estate prices. There could be a situation where real estate prices rise as well, but the way real estate works, there is usually a lag for prices to rise or fall in response to an economic collapse. And since many people are likely to be caught high and dry at the next collapse, I think the real estate market would take a hit as well, at which point I'll convert my precious metals into income-producing properties (or businesses).
For me, owning silver and Gold is a way to store my wealth until this happens or until another opportunity comes up to convert my bullion into an income-producing asset.
The fact that gold/silver does not generate income is the biggest con to owning it.
I don't think I'd have been as bullish on owning either as much as I am in 2020 if we didn't have the Black Swan event you undoubtedly know about. That's why I'm writing this in 2020—it's changed the way I think about the public markets and America in general.
I believe we are close to collapse.
Maybe it will take two years, perhaps it takes five. No one knows. Either way, one thing is for sure: the amount of debt and printed money they created in 2020 has dwarfed everything up to this point combined. To think this is stale or sustainable is a fool's wish.
Cons of owning bullion
The biggest con to owning bullion is you have to store it and transport it and sell it.
In the case of silver, storing your precious metal safely can get cumbersome fast.
There are third party vault companies that will store your bullion for a fee. That is an option worth looking into. I personally think there is still risk here if things go bad.
When storing physical, there could be liquidity concerns of offloading it since you have to physically take it somewhere. I don't know enough about the market, but I suspect this won't be that much of a problem since people will want to own it as the value grows.
With most third-party custodian services, they will liquidate your metals for you, making that an added benefit. This might outweigh the very small risk of an issue redeeming your bullion if things get really bad.
The gold to silver ratio
The Gold to silver ratio represents how much silver it takes to buy an ounce of Gold. Some use this number to determine if either is over or underpriced.
Governments in the past set this ratio as a means of stabilizing the currency backed by these metals. This was usually between the 12:1 and 15:1 range (silver to Gold).
Historically, a ratio of 80:1 or more was thought by the market to be underpriced, which likely resulted in many investors buying silver.
On the flip side, there have been three times that the radio fell below 20, signaling that Gold was likely underpriced (and silver might be overpriced, depending on how you look at it).
The Gold To Silver Mining Ratio
The ratio of silver to gold mined out of the Earth is around 8:1—meaning for every 1 ounce of Gold that is mined, roughly 8 ounces of silver is mined.
Some people believe the silver to gold ratio form price should be based on the mining ratio, but this is not accurate. There are far more variables here, like industrial demand and investment demand.
The one consideration for silver is the fact that it gets used up, with 50% of mining output going to industrial use. Most of this silver ends up in a landfill or in the devices people use on a daily basis. This, in my mind, closes the mining ratio to gold since nearly half of it gets used up.
Since Gold mostly sits there or is used in jewelry, there is actually more gold above ground than silver since so much silver has been lost forever in landfills.
"The major monetary metal in history is silver, not Gold." -Milton Friedman
Should you buy Gold and silver?
Only you can answer that question.
Most people would sleep better at night if they owned some physical gold and silver. They would have the peace of mind that comes with having tangible wealth no matter what.
If the dollar collapses, or if there is a bank holiday or a run on the banks, gold and silver are likely to rise in price as people flee the dollar and other government-issued currencies.
How to buy Gold and silver
I've only bought physical Gold and silver from APMEX.com. Some people like to go to local dealers.
I hold most of my holdings outside of the country with OneGold.
Do your research with each of these.
A few things to consider when buying bullion:
Spot price = the market price for your bullion based on the exchanges. No one is likely to sell you Gold or silver for less than spot, though most would buy it at or below spot if you were in a jam.
Most dealers charge between 2%-5% over spot as a premium. More popular coins will often go for more—which is why I never buy American Eagles.
Junk silver = is based on the percent of silver content—35%, 90% are most common percentages. Be careful with buying older coins that have numismatic value (meaning collector value) which dealers charge a premium for.
When doing your valuations, take the amount of silver in the coin and multiply that by the spot price.
For example, this listing on APMEX is for 90% silver coins $1 face value with Average circulation (that refers to grade, which doesn't matter since you only care about the silver content).
As I write this, the price is $26.82 for $1 face value of 90% American constitutional silver.
$1 face value has a silver content of about .715 oz.
So we multiply this by the spot price of $27.52 and get = $19.68
This means we are getting $19.68 of silver content, and we are paying $26.82 to get it. This means our premium is $26.82 - $19.68 = $7.14.
So we paid $7.14 over spot to get this silver. And that's high, in my opinion.
Maybe you could find some newer 90% coins for a lower premium, or you could shop around.
I like having a bit of constitutional silver, but not as the bulk of my bullion investing strategy. (I like the 90% Roosevelt dimes.)
Instead, aim for 999 silver, which meanings .999 pure.
Your will find a range of premiums for silver and Gold, depending on the design and mint. I recommend finding the best price and sticking with those. I like to buy a mix of silver buffalos, 5oz and 10oz bars, then buy in bulk to get the best price over spot. In 2020, I've paid an average premium over spot in the $3.49-$4.00 range.
- Approximately 50% of the annual silver supply is used in industrial applications.
- Silver is 2nd only to oil in the amount of industrial applications this precious metal is used for to produce many of our day-to-day conveniences. In other words, without silver you wouldn't be reading this awesome report. You'd be too busy hunting and gathering food!
- Silver is driven significantly more by industrial demand than Gold (roughly 50% industrial demand for silver vs. only 10% industrial demand for Gold).
- Silver has a melting point of 961°C and a boiling point of 2162°C.
- It has the highest electrical conductivity of all elements and highest thermal conductivity of all metals
- Silver is found in its natural free form but most of the silver is obtained as a byproduct of Gold, copper and lead refining.
- Silver was first used as far back as 700 B.C.
- Silver is also used in solar power sector and is used to manufacture crystalline solar photovoltaic panels and plasmatic solar cells.
- Other uses include air conditioning, water purification, dentistry, photography and electronics, glass coatings, medicines and also for inhibiting fungal and bacteria growth in clothes.
- While silver is germicidal and kills bacteria, it is not toxic to humans
- Mexico is the world leader in silver mining and is followed by Peru. Other major silver producers are Bolivia, United States, Canada, Russia and Australia
- Although, silver is valued less than Gold, in ancient Egypt silver was considered more valuable than Gold.
- The price of silver is 1/64 of Gold presently. The price of silver has fluctuated between 1/15 and 1/100 of Gold, since 1915.
- In the middle ages, a pound of currency was literally a pound of silver in weight.
- The Phoenicians stored water, wine and vinegar in silver bottles to avoid bacteria contaminating the liquids.
- Silver is stable in oxygen and water, but tarnishes when exposed to ozone, hydrogen sulfide or air containing sulfur due to a reaction with sulfur compounds which cause a black sulfide layer
- Along with Gold, silver is the most ductile (malleable) metal. An ounce of silver can be made into a wire 8,000 feet long
- Bacteria cannot develop a resistance to silver as they can with antibiotics.
- King Henry II coined the first silver currency in England in 1158.
- The Lydians were the first to use silver as money in the 7th century B.C., and was then quickly adopted by the Greeks
- A single grain of silver can be pressed into a sheet 150 times thinner than the average sheet of paper.
- Silver bearings are used in jet engines to give a higher degree of safety.
- Silver is harder than Gold, but softer than copper.
- Silver has had more patents issued with its use than all other metals combined.
- Most industrially used silver ends up in landfills after use and is permanently lost as a result
- The expression 'born with a silver spoon in their mouth' actually refers to health rather than wealth, as children fed with silver spoons were believed to be healthier.
- Physical Gold/Silver ratio is 17:1
- According to geologists, there are 17 ounces of silver for every 1 ounce of Gold or a ratio of 17:1. The current ratio is roughly 60:1. If the true ratio were reflected in price, considering equals amounts of capital were going into both metals, the price of silver should be $73 at $1250 gold
Own the original money
I hope you are now biased to owning at least a little bit of gold and silver.
As they say, history repeats itself, so we are likely to see a return to silver and gold as money as the entire world's fiat scam comes crumbling down.
When this happens, those that own precious metals and other physical assets will benefit while those that don't will suffer tremendously.
To learn how I buy my physical gold and silver, check out this article: The Beginner's Guide To Buying Gold in 2020.
This is not investing or financial advice. Always consult your professional before making investment decisions. And always do your research before investing in bullion.