JWR:
Christopher W. asks a very good question, “should you buy gold and silver coins as an investment?” I think this brings up the point that there are really two uses for gold and silver, as an investment and store of value and as a barter/trade item to facilitate commerce. Unless you want to overpay for an item, you will need change, which for every day purchases is provided by smaller silver coin. A friend on Wall Street put it this way “what are you going to do, chip a piece off a gold brick to buy some food?” Smaller coins can also be a good investment, in the sense that they hold their value better than paper money, but you will create more value faster with bars than coins, if it is return on investment you are after.
Countries with very limited or dysfunctional banking systems have this problem today. Any readers who have traveled to Third World countries know you have to keep your big bills (over $5) hidden away, the smaller bills are what you pull out to transact. Many vendors don’t have change — they are basically living hand to mouth and whatever they make is immediately consumed to feed their families. Also, in many of these countries, there is not a lot of coinage in circulation, hence the need for change. I’ve been in many situations where the item I want to buy costs the equivalent of $1, but I had to spend $5 to get it because I had no change. Fortunately, this was a tourism-travel situation and I viewed the extra cost as a kind of charity. In a SHTF scenario, charity might be limited to donations of items you could easily reproduce, like food from a garden. Coins will become much more precious.
Using gold and silver (and possibly platinum and other rare metals) as a form of investment implies a larger transaction size than those used for every day commerce. Maximizing your return on investment is the goal, not facilitating an efficient commercial transaction, so what is most important is to buy at the lowest cost possible. As an example, if the premium for an American Eagle [one ounce] silver coin is $4 per coin and the cost of silver is $13, you would pay $17 per ounce, a 31% premium. If you bought a large silver bar on the COMEX and paid for physical delivery, it would cost a little over $13, a few percentage points over the actual silver cost. So if you bought 5,000 ounces of silver in American Eagles, it would cost $85,000, while 5,000 ounces of silver in bars would cost $65,000. You could own another 1,500 ounces of silver bars for the same amount of money compared to coins, in this example. When it comes time to sell, silver bullion coins can be counted quickly (assuming they are still in their sealed U.S. Mint boxes, 500 per box), but they will not command the same premium paid when they were purchased. Bars, even though most dealers accept them as genuine as they are serialized by the manufacturer, could require an assay in some circumstances (up to $300 per bar). . Most investment metal traders will be set up for this occasion and in an investment scenario it shouldn’t be a big deal. In large volumes, the coin premium is a significant cost that cuts into investment profits.
The bottom line is you should start with coins, junk silver is very good, as well as some gold coins. If you are fortunate enough to have completed all your other preps and have money left over for “investment”, you will want to go with bars. – CK
