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mrrich724's avatar

Why invest in gold and silver?

Asked by mrrich724 (8522 points ) April 25th, 2011

When talks about economic downturn come up, people mention investing in gold and silver.

But speaking in a worst case scenario, where an economy collapses, wouldn’t it be much more valuable to invest in tobacco, liquor, ammunition, water, fuel, dry consumables etc? Or is that just an extreme POV?

Anything to add to this discussion is appreciated :)

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28 Answers

cockswain's avatar

Probably in a worst case scenario, which I’d imagine is total economic collapse, the items you mention would be a wiser investment. But a downturn and total failure are two different things.

MyNewtBoobs's avatar

My teacher has a theory: The entire history of humanity can be summed up into the search for 3 things: Tasty things, sexy things, and shiny things. Shiny things may not actually have value outside of what we give them, but, well, they’re shiny!!! And thus, they do have value – and not just value, but standardized value. Water in a place that has tons and tons of fresh, clean water isn’t so valuable, but it’s really valuable to someone who lives in a desert.

incendiary_dan's avatar

That wouldn’t be as good for gold and silver dealers, though. :P

Personally, I think seeds are the best investment. That and knowledge of how to get and grow food, and other basic living skills. Even just storable food is good; food doesn’t really go down in value, so even if you end up eating it you’ll have spent less than you would later on.

Not that I don’t have a pile of ammo, but that’s just to keep everything else safe and to get meat.

Also, silver actually does have some practical use. High purity silver can be used to increase the effectiveness of some types of water filters. It can also be used to make colloidal silver, which is a powerful medicine. My dad stocked up on a small pile of silver wire for that purpose.

Personally, I don’t like monetary economies anyway, so I try to spend what little disposable income I have on things that will better help me be self-sufficient regardless of how the economy is doing (and I hope it crashes, for other reasons). My tribe and I will be fine no matter what, because that’s just how I want to live anyway.

Garebo's avatar

I argued that with a commodities trader after work one night. I said G & S are going to go up, this was over a year ago. He looked at me like I was and idiot and said you can’t eat gold and silver can you?, well it’s gone up 330 bucks since then.
Yeah, they use to trade salt at one time which was just a precious as silver and gold-I’ll stick with the precious metals for now.

filmfann's avatar

The Right are pushing their dupes to buy gold right now. It’s gonna collapse, and drop back to $900 or $800. The ones who will make money are those who talked you into it.
Buy land. God ain’t making any more of it.

faye's avatar

My financial advisor expects gold and precious gems to drop in value in the next year. This is in Canada, though. This surprises me a little.

incendiary_dan's avatar

Also, Fernando Aguirre, in his book about surviving economic collapse based on his experiences living in Argentina during and after the 2001 crash, noted that junk gold was more useful than gold coins. Very few places were willing to accept or trade in the coins. Junk gold could be pawned, if for a bit less than it should have been. Still a better monetary wealth storage.

bkcunningham's avatar

Silver has gone up 8.2 percent in one week. It closed today at $44.87 an ounce. Gold closed today at $1503 per ounce. That’s why. (Nobody in their right mind buys gold at these prices. You should have bought about 6 or 7 years ago.)

gondwanalon's avatar

These are uncertain times in a very troubled world. People are bracing for a possible ugly economic depression. The U.S. dollar’s value spirals downward while our President and Congress fights among themselves.

No one can see the future but it is pretty certain that a pocket full of gold coins will never be worth nothing. You can’t say that about a pocket full on paper dollars.

If you are waiting for gold to be $500 per ounce (USD) ever again then you better just go buy some seeds.

Neizvestnaya's avatar

Silver has been a good money maker because it was inexpensive enough to get in on and rose quickly enough to turn a profit for those who want to speculate and then cash out. Aside from making a few bucks though, unless you’re a metal worker and have a market for finished items then S & G aren’t going to be worth so much to you in an societal collapse. Survival skills, geographic knowledge and community will be more important.

As @bkcunningham wrote, Gold is usually high enough most people can’t afford to buy in enough to wait out a high yield market in order to cash out.

incendiary_dan's avatar

Oh yea, if you get seeds don’t get those stupid survival seed banks Alex Jones has been pushing. They’re a ripoff. Just get seeds from reputable heirloom seed dealers. And definitely learn the basics of companion planting.

mrrich724's avatar

Thanks. Lots of good stuff to study!

Garebo's avatar

G&S have appreciated more than 20% against the dollar in the last five. The annualized return on G & S since the great Ponzi scheme unraveled and exposed the banks; my calculations since late 2007 appreciation in these commodities has been nothing short of wonderful, and that is not including common stock, ETF’s or options. It just goes to show that Keynesian Economic can’t work, and never will work, unless we all become indentured servants to the state as designed.

Garebo's avatar

Because the dollar and Euro are worthless, and people have nothing tangible and safe to own.
Most importantly, it will keep going up as it has since I last posted and will continue to until the Euro fails. There really is no end in sight at the present time-so go for it with every thing you have before they confiscate your 401K and/or pension.

mrrich724's avatar

I guess what i meantwas why invest in it from the beginning, not just now… I know precious metals have applications, but let’s say you hbe a pile of gold… Then what? Other than jewelry, I’d imagine most of us would have no use for it that could be satisfied by other metals…

Why does it have such value to begin with?

cockswain's avatar

Because people have faith they can trade their gold for something of more practical value, like food, cars, and rent. That’s really all it is. The relative prettiness and rarity of gold made it a suitable thing to trade. Not so rare as diamonds that there isn’t enough to pass around, but not as common as coal. But now there isn’t enough gold in the world to support global economic activities, so we have paper money that isn’t backed by gold, just faith it can be traded for other tangible things.

mrrich724's avatar

GA @cockswain

Next question, am I the only one who thinks that idea is absolutely absurd?!

cockswain's avatar

No, but it just evolved for practical reasons. For example, I needed to buy a water heater today, and I got one off craigslist for $200. Without cash, I would have needed to have something in sufficient supply the seller needed. Let’s say he wanted 60 lbs of beef, or 100lbs of canned peaches, wanted someone to repair his fence, or would like a ride to Utah. If I can’t provide that, I’d have to get some peaches or drive him to Utah before I could get a water heater. And imagine what I’d have to do to get peaches or gas. And so on. It’s just for convenience. I can use the same “good” that I can trade for buying the water heater that he can use to hire someone to fix his fence. He has faith when he takes cash from me that he will certainly be able to use it to purchase other goods or services, or he wouldn’t want my cash.

mrrich724's avatar

No. I get that part. I get the motivation behind usin the note to represen the transfer of value… But te idea that there is no true value to back it up is what stumps me.

Why gold? Why not potable water or livestock or something else that is ACTUALLY more valuable to most of the people who carry around the bills.

(Not necessarily water, I’m just trying to think of something with actual use an value to many more people)

I’m just stuck on how gold which has little actual use to most people became SO valuable that gold is what was used to be the standard that it is… The absurd part is the reasonig behind the gold… Because it’s pretty and rare? Really? So in the end if you want to cash out your dollars all you will have is shiny rock with little utility tothe common person…

cockswain's avatar

That’s how it appears to have evolved in human history, sensible or not. Someone thought jewels were cool looking so they became desirable. If you are still not a believer, I’ll PM you my address so you can mail me a box of cash. Sorry, I don’t have faith your check will be valid.

incendiary_dan's avatar

For something to be currency it needs to be both relatively rare and fungible.

cockswain's avatar

I had to look up fungible. At first I thought it was associated with fungus.

incendiary_dan's avatar

When I first heard it, I did too. Now I trot it out whenever I can.

Garebo's avatar

Yeah, I argue with someone at work about the same thing and a commodity broker who scolded me by saying I was stupid to suggest gold ($985 at the time) “you can’t eat, it so what good is it”. Well, salt was precious at one time, obvious it’s value was due to no refrigeration, which seems plausible,but at the same time absurd to be a means of barter or exchange of value.
Scarcity, rarity and beauty in the eyes of many, for thousands of years creates a pretty strong perception that something tangible is quite valuable and precious compared to fiat money, And so is palladium, platinum, silver and oil, the main reason oil is so expensive is because our currency is worthless therefore it takes more dollars to buy it overseas, and it will continue to be so as long as the dollar is weak, or until we decide to produce to the extent we are capable of.

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HerbertH's avatar

Gold and silver are the best and most useful metals ever known. Among investor trades in foreign currencies or other precious metals, gold and silver are the favorite. In the hope that the value of gold and silver will rise in the future, investors purchase gold or silver, or invest in companies involved in the gold or silver industry. The following benefits make silver or gold a good investment:
1. These metals have high economic value, and are tangible and inherently valuable.
2. They are easy to buy and sell.
3. They are independent from the monetary policy and political issues of any individual country, and competitively priced.
4. They are easily stored and transported, and are a highly liquid asset.

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