Gold and Silver as an Insurance Policy?

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pillblocker
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Gold and Silver as an Insurance Policy?

Post by pillblocker » Thu Jun 05, 2014 10:41 am

I am well aware that these two precious metals are horrible investments (no capital gains, no interests and no dividends) and have only twice in the last 35 years (1980 & 2011) could have been seen as actual investments, but the prices only went up out of economic fear. They’re value is purely psychological although silver is a semi-industrial metal.

Yet what are your thoughts on owning gold and/or silver as an insurance policy? Specifically in coin form? They seem like a really good versatile capital asset to own in case you need to liquidate in the event stocks and bonds go bad, hyperinflation, dollar devaluing, etc.

So I am talking about owning between $5k & $10k worth and leaving it in safe deposit box and just having it as an extra safety net in addition to an emergency fund. And since these metals have mostly psychological value, I guess you could say my owning them is so I’ll sleep better at night.

Although if you do buy them at a low spot price, these two metals do have a value as a preservation of wealth, preserving the purchasing power of your dollar.

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Re: Gold and Silver as an Insurance Policy?

Post by Call_Me_Op » Thu Jun 05, 2014 10:55 am

pillblocker wrote:I am well aware that these two precious metals are horrible investments (no capital gains, no interests and no dividends)...
This is not true. If there were no gains of any kind, you would be crazy to purchase it and it could not function as an insurance policy. People buy gold in hopes of it providing a large capital gain under certain circumstances. That said, it is also quite capable of providing a capital loss.
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Re: Gold and Silver as an Insurance Policy?

Post by Novine » Thu Jun 05, 2014 10:59 am

I've never understood the allure of precious metals as a backstop if the economy collapses. What are you going to do with those gold coins? Who's going to be interested in trading something you need for gold?

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Watty
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Re: Gold and Silver as an Insurance Policy?

Post by Watty » Thu Jun 05, 2014 11:08 am

Gold and Silver as an Insurance Policy?
It would be good to sit down and list the types of events that you would want to buy the insurance coverage for and then decide if gold and silver are the best way to protect yourself. I suspect that when you look at the details you will find that there are better ways to spend your money for "insurance" for most scenarios.

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Re: Gold and Silver as an Insurance Policy?

Post by Runner01 » Thu Jun 05, 2014 11:09 am

In the event that equity markets have collapsed I find it hard to believe that precious metals would be valuable in the short term. It may be better to store food, water, guns/ammo, and other survival supplies. Some time after the initial collapse precious metals may become the currency of choice but until then the favored currency would be the aforementioned survival supplies.

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Re: Gold and Silver as an Insurance Policy?

Post by bhsince87 » Thu Jun 05, 2014 11:17 am

IMO, gold is less of an insurance policy today than it was back when many countries were on a partial gold standard.

That being said, I think it can still add some value. It's a fairly liquid and concentrated form of wealth you can take with you if you need to "get out of town". It can also be handy for avoiding taxes and capital controls. Not that I'm condoning anything illegal, but if economic chaos ensues, it could serve a role there.

And also, I've said it before, and some people think I'm joking, but in all seriousness, I keep some gold at home, and I get it out and play with it sometimes! It's a nice way to be reminded of the psychological weirdness from which it ultimately derives its value.
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Re: Gold and Silver as an Insurance Policy?

Post by dbr » Thu Jun 05, 2014 11:36 am

What specifically is the risk being insured?

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Re: Gold and Silver as an Insurance Policy?

Post by bnes » Thu Jun 05, 2014 11:47 am

Holding actual coins has risk: for example the risk of theft while delivering them.
There are also high transaction fees.
A Gold ETF has none of that.

You have several doomsday scenarios: Katrina, asteriod srike, civil war or goverment collapse. With a regional event
like Katrina you need short term emergency food and transportation, gold won't help. With asteriod strike you need the ability to form a community
that can survive longer term. With a breakdown of government the issue of hard assets really starts to come into play:
you may need to pay bribes or protection money.

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Re: Gold and Silver as an Insurance Policy?

Post by jdb » Thu Jun 05, 2014 12:25 pm

I read a few years ago a published report (but do not have citations) that portfolios which contain about 5 percent (but not more) allocation to gold and silver have better long term results than similar portfolios without the commodity exposure due to non correlation factors. Curious if anyone can find those published reports.

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Re: Gold and Silver as an Insurance Policy?

Post by Professor Emeritus » Thu Jun 05, 2014 12:43 pm

dbr wrote:What specifically is the risk being insured?
:happy obviously the risk of not owning gold or silver :happy

the term "insurance" is routinely used so carelessly that it is an almost useless term.

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Re: Gold and Silver as an Insurance Policy?

Post by Professor Emeritus » Thu Jun 05, 2014 12:47 pm

bnes wrote: With a breakdown of government the issue of hard assets really starts to come into play:
you may need to pay bribes or protection money.
Getting the value from Gold requires a functional government. Otherwise they shoot you for it. The first thing people did when government broke down was bury the gold DEEP

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Re: Gold and Silver as an Insurance Policy?

Post by surfstar » Thu Jun 05, 2014 12:49 pm

You can't eat gold or silver.

I see no reason why people want to own them for economic Armageddon. Silver bullets maybe (sip a Coors while watching all heck break loose! and real bullets would be useful). Although I do not see why people stockpile those things either. Do you want to survive in a world that far gone?

If people (I mean posters on here that ask these questions) are truly worried about a crazy collapse, they should be sitting on months of food & water supplies, gasoline (be sure to stabilize it and/or cycle regularly), guns & ammo, etc...
:oops:

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Re: Gold and Silver as an Insurance Policy?

Post by lululu » Thu Jun 05, 2014 1:45 pm

Professor Emeritus wrote:
bnes wrote: With a breakdown of government the issue of hard assets really starts to come into play:
you may need to pay bribes or protection money.
Getting the value from Gold requires a functional government. Otherwise they shoot you for it. The first thing people did when government broke down was bury the gold DEEP
I think during the civil war it was fairly common to bury gold and jewelry when the area was about to be overrun. However, the idea was it could be retrieved when stability resumed.

What use gold would be in a permanent catastrophe has never been clear to me. Food, medicine, seeds, gums and ammunition, yes. A hunk of metal of no use to anyone. no.

The OP has been worried about these catastrophe scenarios before. If I were him, I'd devote some thought to long term food storage, batteries, battery powered radio, flashlights or a bunch of inexpensive candles and matches, back up medication, a hand crank charger, and so on, and devote a closet in his home to that. As long as the food and medicines are cycled periodically into normal use and replenished, the batteries are tested and replaced as necessary, there is very little extra expense involved and it does come in useful if there is a weeks' long power outage or some such. Don't forget food, medicine, and litter for pets.

i have a closet like that because I live in hurricane country, and I had one when I lived in earthquake country. It would be useful for a few weeks of disruption, but, of course, useless if the house collapsed.

Some people also keep a kit in their car trunk. All I have in my car is a wool blanket and a shovel in case I get stuck in winter.

I do carry a month's worth of medication in my pocketbook, along with a Swiss army knife, a very small Maglite, and a compass.

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Re: Gold and Silver as an Insurance Policy?

Post by EnjoyIt » Thu Jun 05, 2014 2:06 pm

surfstar wrote:You can't eat gold or silver.

I see no reason why people want to own them for economic Armageddon. Silver bullets maybe (sip a Coors while watching all heck break loose! and real bullets would be useful). Although I do not see why people stockpile those things either. Do you want to survive in a world that far gone?

If people (I mean posters on here that ask these questions) are truly worried about a crazy collapse, they should be sitting on months of food & water supplies, gasoline (be sure to stabilize it and/or cycle regularly), guns & ammo, etc...
:oops:
I have have thought through this question recently as well. Like many I have feared economic collapse and bought some of that gold and silver. Gold is still held for small gain, and silver for a solid loss. As it is only 2% of my portfolio and shrinking monthly with new contributions that will not go to gold or silver. Regardless I too wonder what scenario I will actually need gold or silver. Here are my thoughts on the common scenarios given.

1) Collapse of the world's fiat currencies: I have no clue if it will ever happen, but historically ALL fiat currencies have failed. Can this happen in todays world where we are all so intertwined? I honestly don't now. But if our and possibly all currencies fail then gold and silver will be a necessity.

2) The US dollar not being the world reserve currency: I think this is a situation that can occur. Over the coarse of history many countries have lost their world reserve currency status. Historically this will not cause a collapse of the US dollar and therefor the actual "need" for gold diminishes. The equities we invest in will still continue to do business and still provide a profit. Plus having international exposure will also help maintain value in our portfolios.

3) Civil war: If civil war is to break out in our country, I don't think gold will be the answer but instead food, water and bullets. If you want to hedge against war, you will always be able to barter with guns and ammo probably much better than with gold or silver bullion. Eventually order will resume, many of the business we invest in will continue to make products and get back to making a profit.

4) Major catastrophe: Again food, water, shelter will be your best assets, more than likely guns and ammunition will be equally important and good for barter. If a major catastrophe is to last long term and you are to survive it, then eventually a society will form where gold and silver will once again be used for currency as there will be no or minimal government and the paper dollar will be worthless, many of the business we invest in will equally be worthless

Basically what I see, there are two reasons to own gold. Destruction of our fiat currency and destruction of the world we live in as we know it today. Both of which are very unlikely scenarios in my opinion. I will continue to hold the tiny amount of coins I have because they are pretty to look at, and maybe, just maybe I will need them in the future.

Please if anyone has any opinions on my views above, I would love to hear them. The need to hedge with gold or silver has been a big dilemma in my mind and would like to hear any view that is different than mine.

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Re: Gold and Silver as an Insurance Policy?

Post by lululu » Thu Jun 05, 2014 2:21 pm

Beckmaster wrote: If a major catastrophe is to last long term and you are to survive it, then eventually a society will form where gold and silver will once again be used for currency as there will be no or minimal government and the paper dollar will be worthless, many of the business we invest in will equally be worthless
Why would gold and silver be used? This is a serious question from someone who knows nothing about currency. Because they are rare? As far as I can tell, they are useless for anything except pretty jewelery and maybe a few industrial uses. Maybe people will go back to using quahog shells.

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Re: Gold and Silver as an Insurance Policy?

Post by drbagel » Thu Jun 05, 2014 3:12 pm

Barter only works if two parties have what the other needs. If society degenerates to a state of barter, won't there be a need for a new medium of exchange? Gold fills this role well. It does not tarnish. It is hard to produce. It is relatively easy to identify or to validate. It has few practical uses that would result in its consumption. Most people have some. I think it would naturally fill that role.

I am not advocating for owning gold. I just don't agree that it would be worthless in a currency collapse. People could take your food stash as quickly as they could take your gold. In fact, I think gold would be easier to secure. You can stick gold in a dark hole and it will be there in a month, year or decade. Try that with emergency supplies.

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Re: Gold and Silver as an Insurance Policy?

Post by chocolatemuffin » Thu Jun 05, 2014 3:33 pm

drbagel wrote:Barter only works if two parties have what the other needs. If society degenerates to a state of barter, won't there be a need for a new medium of exchange? Gold fills this role well. It does not tarnish. It is hard to produce. It is relatively easy to identify or to validate. It has few practical uses that would result in its consumption. Most people have some. I think it would naturally fill that role.

I am not advocating for owning gold. I just don't agree that it would be worthless in a currency collapse. People could take your food stash as quickly as they could take your gold. In fact, I think gold would be easier to secure. You can stick gold in a dark hole and it will be there in a month, year or decade. Try that with emergency supplies.
I don't see them using gold/silver in "The Walking Dead". :o

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Re: Gold and Silver as an Insurance Policy?

Post by Jack FFR1846 » Thu Jun 05, 2014 3:46 pm

Why not silver coins? If stored at home, a thief cannot physically carry away as much. Need to cash in $50 face? Not so bulky that you could not go with it to the local coin or pawn shop

Gold IS used in industry. I don't get why people think they are not. Lead free IC leads are nickle palladium gold. Some hi rel power supplies are plated in gold.

Some that I am less sure of: edge connectors, high end audio contacts, older cell phone contacts

It isn't insurance unless we're being overrun but the rest of the world is unaffected. Then we could buy from them with gold
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Re: Gold and Silver as an Insurance Policy?

Post by EnjoyIt » Thu Jun 05, 2014 3:53 pm

lululu wrote:
Beckmaster wrote: If a major catastrophe is to last long term and you are to survive it, then eventually a society will form where gold and silver will once again be used for currency as there will be no or minimal government and the paper dollar will be worthless, many of the business we invest in will equally be worthless
Why would gold and silver be used? This is a serious question from someone who knows nothing about currency. Because they are rare? As far as I can tell, they are useless for anything except pretty jewelery and maybe a few industrial uses. Maybe people will go back to using quahog shells.
Historically gold has always been used as a currency until a fiat currency took its place or used in conjunction. I see no reason for it to not be used again especailly if there was no value in paper currency. Something will eventually be needed in exchange for goods and services. Gold seams to fit that something very well as Dr. Bagel describes.

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Re: Gold and Silver as an Insurance Policy?

Post by SimonJester » Thu Jun 05, 2014 4:11 pm

I haven't seem them use any gold or silver on the Walking Dead. I'd stock pile the element PB instead.
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin

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Re: Gold and Silver as an Insurance Policy?

Post by Ged » Thu Jun 05, 2014 4:21 pm

Beckmaster wrote:
1) Collapse of the world's fiat currencies: I have no clue if it will ever happen, but historically ALL fiat currencies have failed. Can this happen in todays world where we are all so intertwined? I honestly don't now. But if our and possibly all currencies fail then gold and silver will be a necessity.

Please if anyone has any opinions on my views above, I would love to hear them. The need to hedge with gold or silver has been a big dilemma in my mind and would like to hear any view that is different than mine.
Well, one could point out that all commodity backed currencies have also failed. After all there are none in use in the world today. And the history is that gold doesn't maintain it's value well when you need it most; that is during a famine.

The Sumerians had it right. Their shekel was backed by a fixed weight of grain. In fact the word shekel is based on the Akkadian word for weight.

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Re: Gold and Silver as an Insurance Policy?

Post by Professor Emeritus » Thu Jun 05, 2014 4:34 pm

Beckmaster wrote:[
1) Collapse of the world's fiat currencies: I have no clue if it will ever happen, but historically ALL fiat currencies have failed. Can this happen in todays world where we are all so intertwined? I honestly don't now. But if our and possibly all currencies fail then gold and silver will be a necessity.
e.

All repeat all currency is Fiat. All property ownership is Fiat. All marriages are Fiat. FIAT IS GOOD

Fiat is the only way to prove it's your gold


No animals can do fiat. it is a human invention

The alternative to fiat is possession and barter, just like Neadertals or even Otzi

Neandertals had no currency. Currency co developed with the entire modern world.
Last edited by Professor Emeritus on Thu Jun 05, 2014 8:24 pm, edited 1 time in total.

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Re: Gold and Silver as an Insurance Policy?

Post by Browser » Thu Jun 05, 2014 5:20 pm

I have some old half dollar coins that are mostly silver. I'm wondering if I use them whether the merchant will give me 50 cents worth of product or the value of the silver content in product. What do you think?
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Re: Gold and Silver as an Insurance Policy?

Post by Gattamelata » Thu Jun 05, 2014 7:29 pm

drbagel wrote:Barter only works if two parties have what the other needs. If society degenerates to a state of barter, won't there be a need for a new medium of exchange?
No, by definition. Barter is exchange without a medium. I want your excess duck eggs, you want my excess untainted water, so we trade. We don't shout "Where's the gold?" and refuse to exchange anything.
drbagel wrote:I am not advocating for owning gold. I just don't agree that it would be worthless in a currency collapse. People could take your food stash as quickly as they could take your gold. In fact, I think gold would be easier to secure. You can stick gold in a dark hole and it will be there in a month, year or decade. Try that with emergency supplies.
The argument against gold is not "People could take it." The argument against gold is that "Nobody would take it." In a total financial and currency collapse (which would bring about problems greater than "my savings is worth nothing now," by the way - like starvation on a massive scale), the concern is not "How do I continue to build my retirement portfolio?" it's "How do I get enough food, water, and shelter to continue living for another day?" I suppose if the collapse is temporary, you could dig up your hoard after the "recovery" and try to live off it (although security is still a problem - maybe you can hide your stash, but good luck keeping it hidden when desperate or unprincipled people are willing to hurt you to get it). But if the collapse is long-term, gold is worthless. Food, shelter, and security are what's important. When everybody's struggling to find enough to eat, and you roll up to the wasteland bandit camp with your top hat, monocle, and krugerrands, I think you'll find that you wish you had something besides gold to trade.

Also, in the "Temporary Financial Collapse" scenario, I think the heap of gold is not valuable even if you manage to keep it safe. The amount of disruption after a complete currency collapse would be catastrophic. I can't imagine that there's a point where everybody just returns to their homes and agrees that things will resume as they have before (minus the huge loss of life, wealth, and industrial base caused by the cessation of our economy for however long). I think these changes would be so disruptive that it's not really worth planning for. If you really want to plan for the worst, keep a stockpile of dry goods.

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Re: Gold and Silver as an Insurance Policy?

Post by lululu » Thu Jun 05, 2014 10:33 pm

Professor Emeritus wrote: Neandertals had no currency. Currency co developed with the entire modern world.
Do we know that? Perhaps they used something equivalent to wampum.

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Re: Gold and Silver as an Insurance Policy?

Post by sdsailing » Thu Jun 05, 2014 10:37 pm

dbr wrote:What specifically is the risk being insured?
Zombie apocalypse ?

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Re: Gold and Silver as an Insurance Policy?

Post by Professor Emeritus » Fri Jun 06, 2014 4:00 am

lululu wrote:
Professor Emeritus wrote: Neandertals had no currency. Currency co developed with the entire modern world.
Do we know that? Perhaps they used something equivalent to wampum.
Nope

Even the ancient Egyptians had nothing like "currency"

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Re: Gold and Silver as an Insurance Policy?

Post by lululu » Fri Jun 06, 2014 5:56 am

Professor Emeritus wrote:
lululu wrote:
Professor Emeritus wrote: Neandertals had no currency. Currency co developed with the entire modern world.
Do we know that? Perhaps they used something equivalent to wampum.
Nope

Even the ancient Egyptians had nothing like "currency"
I am not seeing any documentation to justify the statement about Neanderthals.

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Re: Gold and Silver as an Insurance Policy?

Post by Professor Emeritus » Fri Jun 06, 2014 6:48 am

lululu wrote:
Professor Emeritus wrote:
lululu wrote:
Professor Emeritus wrote: Neandertals had no currency. Currency co developed with the entire modern world.
Do we know that? Perhaps they used something equivalent to wampum.
Nope

Even the ancient Egyptians had nothing like "currency"
I am not seeing any documentation to justify the statement about Neanderthals.
Ok I just got back from the Neandertal Museum near Dusseldorf. The evidence of abstract communicative thinking by Neandertals is almost nonexistent .

Neandertals made excellent lethal weapons. But they made no cave paintings or comparable art. Currency is an incredibly more complex concept.

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Re: Gold and Silver as an Insurance Policy?

Post by TheTimeLord » Fri Jun 06, 2014 7:09 am

Reading the responses here I see many people think of precious metals as insurance against so of a Depression era worldwide collapse or apocalypse, they aren't ihmo. That said they are insurance against an individual nation's instability or a national fear of the future, just ask the people of Cyprus.
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Re: Gold and Silver as an Insurance Policy?

Post by bandb4114 » Sat Jun 21, 2014 9:19 pm

pillblocker wrote:Yet what are your thoughts on owning gold and/or silver as an insurance policy? Specifically in coin form? They seem like a really good versatile capital asset to own in case you need to liquidate in the event stocks and bonds go bad, hyperinflation, dollar devaluing, etc.

So I am talking about owning between $5k & $10k worth and leaving it in safe deposit box and just having it as an extra safety net in addition to an emergency fund. And since these metals have mostly psychological value, I guess you could say my owning them is so I’ll sleep better at night.
Most gold or silver stackers will say if these things happen, the banks will close and you won't be able to get into your safe deposit box.

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Re: Gold and Silver as an Insurance Policy?

Post by Index Fan » Sat Jun 21, 2014 11:07 pm

I think that a small portion of one's wealth invested in precious metals as an insurance policy against financial system collapse is a reasonable idea. In the last 100 years or so, several countries have had stock exchanges that went to zero. There is a non-trivial possibility that the somewhat fragile and interlinked global financial system, or any given country's financial system, may collapse. A recent example is Argentina's Great Depression 1998-2002, where precious metals came in very handy when the peso was greatly devalued and there was widespread poverty and civil unrest.

You might consider diversifying your PM holdings location-wise, as safety deposit boxes have in the past been subject to official government oversight. Even burying a small amount somewhere isn't crazy IMHO.

As long as it's less than 10% of your wealth, I say go for it. Some may laugh, but there are stories of people using gold to buy their way out of horrid circumstances in the past (1930s Germany, for example). Human nature is always the same, so do not believe those who say 'it can't happen here' or 'it can't happen in this day and age.' Insurance is a good thing if it helps you sleep better. And maybe collecting PM coins might be a fun hobby for you.
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Re: Gold and Silver as an Insurance Policy?

Post by pjstack » Sun Jun 22, 2014 12:00 am

But, WHY do all countries of the world have gold reserves? The U.S. has Fort Knox and some large vault in New York city.
China is buying (and mining) gold.

And, if gold and silver are so worthless, why are all these hypothetical bandits going to steal it from you?

Our coins (1964 and before) were 90% silver. Now they are just tokens.
pjstack

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Re: Gold and Silver as an Insurance Policy?

Post by willie838 » Sun Jun 22, 2014 1:42 am

hearing peter schiff on the joe rogan podcast really got me spun on this one day.


then i realized just how vested his own personal interests were in selling currency fear.

before i buy gold i'll be getting a gun. That seems like a lot more worthwhile holding if the whole shebang goes up in flames haha.

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Re: Gold and Silver as an Insurance Policy?

Post by Dandy » Sun Jun 22, 2014 5:53 am

If I were afraid of bad times e.g. market crash, hyper inflation I would rather have U.S. Treasuries/TIPS than gold or silver.

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Re: Gold and Silver as an Insurance Policy?

Post by Index Fan » Sun Jun 22, 2014 6:12 am

willie838 wrote:hearing peter schiff on the joe rogan podcast really got me spun on this one day.

then i realized just how vested his own personal interests were in selling currency fear.

before i buy gold i'll be getting a gun. That seems like a lot more worthwhile holding if the whole shebang goes up in flames haha.

This is true, there are a lot of fear peddlers out there. There are a lot of peddlers out there, period.

That doesn't negate the argument for a small amount of PM holdings as insurance against bad things happening.

And guns are another subject, but you can make a case for them, too...

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The law is similar in most states...
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Re: Gold and Silver as an Insurance Policy?

Post by Index Fan » Sun Jun 22, 2014 6:20 am

Dandy wrote:If I were afraid of bad times e.g. market crash, hyper inflation I would rather have U.S. Treasuries/TIPS than gold or silver.

That may work out, but it depends on the circumstances. Say the US dollar lost its world reserve currency status and the dollar dropped steeply in value. The Chinese and other countries have talked about coming up with another world reserve currency- it's not beyond the realm of possibility.

Runner01 wrote:...It may be better to store food, water, guns/ammo, and other survival supplies. Some time after the initial collapse precious metals may become the currency of choice but until then the favored currency would be the aforementioned survival supplies.

That's a good idea, too. The government recommends being prepared for various disasters. This is a prudent thing.
"Optimum est pati quod emendare non possis." | -Seneca

Call_Me_Op
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Re: Gold and Silver as an Insurance Policy?

Post by Call_Me_Op » Sun Jun 22, 2014 8:26 am

dbr wrote:What specifically is the risk being insured?
Normally, the risk is viewed as extreme currency (in this case, the dollar) devaluation.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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