Gold & Silver – A Michigan Survival Guide Installment

The following submitted by a regular reader who has “financial experience” but wishes to remain anon.

DISCLAIMER: To be perfectly clear, I am NOT giving you investment advice. I am talking about owning gold ONLY for use in a severe breakdown of our economy or government that will be relatively short-lived. If you are buying for investment, there are many disadvantages and downsides, including loss of principal. Do NOT do this because you think gold prices are going up and you are also going to make money. The only thing I can say in this regard is that is a fact that gold has never been worth zero (to quote Gordon Liddy from his Rosland Capital TV ad).

In the case of rampant inflation or times of economic breakdown, it could be advisable to have “hard currency” coins to use in ESSENTIAL financial transactions.

By “hard currency” I mean gold or silver bouillon coins.

When buying coins, you have several choices to make. I would like to try to outline the pros and cons of each decision.

First, your coins can either be recently-issued gold bouillon or “numismatic” (collectible) coins. Recently-issued coins are issued by government mints and usually come in one ounce sizes. (Some coins come in fractional ounces but are very hard to purchase at a reasonable price). They are generally not legal tender, that is, they are not normally accepted for payments. Numismatic, or collectible coins, are usually 100 or so years old, and have value not only for the gold content, but also have value for their rarity.

Let me give an example. A 1908 $20 Saint-Gaudens gold coin is a collectible coin that contains 1 ounce of gold. You could pay $1800 to over $2000 for this coin, depending on several factors. On the other hand, a 2009 Gold American Eagle, also containing 1 ounce of gold can be had for around $1100. The difference in the values is due to the “collectability” of the Saint-Gaudens.

Why is this important? Once in our history, the US Government recalled all gold coins that were in general circulation as money. It made it illegal to own those gold coins. The exception was, that COLLECTIBLE coins were exempt and did not have to be turned in. Subsequently, the government relaxed its ownership restrictions and now you can own non-collectible gold coins again. However, what is to keep the government from recalling again? Nothing. Therefore, coin dealers will argue that you should buy the collectibles (on which they make more money) so that you will not lose them in a recall.

What did I do? I bought the gold bouillon coins. My reasoning is that in a true emergency, there will probably be a LOT of laws that would be ignored. Kids, can you say “black market”? Can you say “barter”? As stated earlier, my gold is for a true economic or governmental crisis. Secondly, I get almost twice as much REAL gold for my dollar by buying bouillon over numismatic.

Second decision. Do you buy US coins or foreign? Foreign coins tend to be just a bit cheaper than US because there is less demand for them. But, think of the times “of true crisis”. Which coin would you accept – US minted coin, that you would recognize or one from some foreign country such as South Africa (Kugerand) or Australia (Nugget)? I chose to go with recognizable US minted coins.

Third choice. Gold or Silver? In a true crisis, prices for things will be astronomical (recall Germany in the 1930s). For purpose of this discussion, let’s keep things simple and just think in terms of today’s prices. Today, a loaf of bread is about $2. A one ounce gold coin is worth about $1000. If all you have is a 1 ounce gold coin and you want to buy a loaf of bread, how will the baker give you your $998 of change? If he/she does not have gold or silver, you are about to be screwed.

So, you want to also own some 1 ounce silver coins. You can buy a Silver American Eagle for about $18. So, you are in much better shape when buying that loaf of bread.

One other possibility is that you can buy fractional ounce gold coins: 1/10th ounce, ¼ ounce, ½ ounce. However you will pay more per ounce buying fractional. You are better off buying silver on a cost per ounce basis.

Fourth choice. Do you hold the coins or let the dealer hold them. Well, I think that if things go to hell in a hand basket, it will happen quickly. In that case you want the coins IN YOUR HANDS. Additionally, the dealer will charge you a safe keeping charge. It will be better to go out and buy a good safe for your house. (You might also consider a bank safe deposit box, but consider if access to the box would be possible in an emergency). Another consideration is that some companies will suggest you buy the coins with IRA money. If you do, you will NOT be able to get physical possession of the coins.

So, here’s a summary of what I would do. The numbers I am using here are only for example. I would buy $5,000 in gold American Eagles (about 5 coins), and $900 in silver American Eagles (about 50 coins). Expect to also pay about $100 in shipping charges. Stash these in a good home safe, near your emergency survival pack.

I investigated three companies – Goldline, Rosland Capital, Blanchard. I found Blanchard to be a bit better on price (compare the coin price to the spot price of gold at the time you get your quote). I feel Goldline and Rosland are reputable dealers who might be able to offer you other perks. There are many others out there, but as in any financial transaction, be careful and use due diligence.

7 comments for “Gold & Silver – A Michigan Survival Guide Installment

  1. amy
    October 2, 2009 at 5:04 pm

    who buys goid bullion coins in the West Michigan area? Like the Gold eagle and the philharmonic?

  2. Chuck
    October 22, 2009 at 10:14 pm

    Amy,
    Generally, you may have trouble finding a commercial gold coin dealer in any but the largest cities. You may find a pawn broker who will do so. Be sure you know the spot price of gold is when you attempt to sell. You may have to take a 20% hit on what you get in pawn value vs. spot price.

    Banks do not buy boullion coins. There are numerous coin shops that buy collectable coins, and some may buy boullion.

    If you have purchased boullion coins for an emergency, but have to sell them to meet a more normal day-to-day need, you might be better off financially to sell back to the commercial dealers like Goldline, Rosland, or Blanchard.

    But be prepared to take a loss due to the wide spread of price between “bid” and “ask”.

    But if you are buying gold bullion for reasons other than an economic meltdown/emergency, you are outside of the scope of the advice given above.

  3. October 24, 2009 at 3:46 pm

    Chuck,

    Are there ways to sell your physically possessed gold using stop or limit orders just like regular commodities trading or other securities trading?

    • Chuck
      October 24, 2009 at 5:57 pm

      Jason and Amy,

      I ran across some new info today and will use this post to answer you both.

      First, Jason. I have no experience or knowledge in commodities market where you could buy or sell your own physically possessed gold. I do know of a “stock” which is basically a company that’s only asset is gold. You can buy shares in ticker AUI (NYSE I think) and trade that like any stock with stop and limit orders. Their share price is usually around 1/10 the current price of gold.

      Amy, I found an article today that said the US Mint is going to start issuing gold American Buffalo coins again. These will be pure 24K gold, as opposed to the American Eagles which are 23K gold (but do contain one oz. of pure gold plus another metal added for durability). The Buffalos are said to be sold thru dealers. When consulting the list of approved dealers in MI, I found one in Grand Rapids: Accent Jewelry & Collectibles
      522 28th St., Sw Grand Rapids, MI 49509 616-532-5060. Presumably they will also buy and sell Eagles if they are selling Buffaloes.

      The US Mint web page for the Buffaloes is: http://www.usmint.gov/mint_programs/buffalo24k/

      What I did not find in my quick look at Buffaloes is what amount of gold will they contain, hence what will be the approximate purchase price. Buffaloes went on sale Oct. 22.

      Chuck

      • October 24, 2009 at 7:00 pm

        Thanks for the reply, Chuck.

        As for AUI, I think I ended up trading that particular ETF in a virtual stock market game we used in a finance class I took last semester.

  4. February 14, 2010 at 11:22 pm

    We’re real estate investors with great exp. in Tax, Trusts, REITs, senior citizen issues (per our website) and bullion trading since age 15. Our grandparents taught us the value of “Money” (metals) vs. “Currency Fiat Paper” a mere “promise” to pay or a fancy IOU.

    Anyhow we’ll take physical Gold/Silv/Plat. anyday…

    GOOD REPORTING, GOD’S SPEED. Email if desired.

    Sincerely, Jim Tekely Jr. MBA BBA CFE Exec. Dir. NASC
    Cindy Ebner, BBA, J.D.

  5. Matt
    December 19, 2010 at 10:31 pm

    My question is: what about one ounce silver bars? Are they accepted like silver coins are? Currently about 4/5 of my silver are silver bars. 1/5 of my silver are silver coins. When you go to pay someone with a silver bar, will they be less likely to make a deal with you than if you had a silver coin?

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