Following on from another post: What is the Best Type of Gold to Buy For Trading in a Currency Collapse?, we have a somewhat related question. Why would you buy gold or silver coins over other potentially more useful or tradable everyday items? The full question was:
“Considering the variety of things that might become tradable in the event of a breakdown of society, I wonder what might be the advantage of gold or silver coins over other tradable items such as tools, water or bottles of wine (for example), since the average person could not be expected to have all the technology required to authenticate the purity of materials claimed to be silver or gold but might easily recognise basic tools, clean water or wine?”
We have answered most of the various parts of this question in previous posts. So we’ll try and summarise them below. But the full articles are also linked.
What You Should Buy Before You Buy Gold or Silver
Our first thought is something that we first wrote about back in 2013: What Good is a Bar of Gold When the Shelves Are Empty?
That is that “…you should have all other vital supplies – food, water etc – before you even start thinking of buying silver… As the Christchurch [and Kaikoura] earthquakes prove it pays to be ready with emergency food, water, clothing and shelter for natural disasters as well as government made ones.”
The COVID-19 scare has also shown us how under-prepared most people are. It also highlighted how quickly stocks of various items can be depleted in a crisis. Getting hold of flour during the lockdown was close to impossible for many people.
So first and foremost make sure you have enough of the necessities of life for yourself and your family in a short term emergency. An isolated natural disaster could mean you won’t have access to these, but most likely only for days or weeks.
(Hint: Head over to our sister site, Emergency Food NZ, for Emergency Food, Water Filters and Survival and First Aid Kits.)
Whereas in a truely widespread societal collapse you could be talking months or even years.
Therefore in “prepping” for such a “mad max” type outcome, then you would likely want to keep some extra everyday necessity items too. Just in case you wanted to trade them for other goods people had.
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What is the Advantage of Gold and Silver Over Tradable Everyday Necessities?
Next up let’s look at the advantages of gold and silver coins over tradable items “such as tools, water or bottles of wine”.
As we said already, having some extras of these to trade would also not be a bad idea.
However there a number of advantages of gold and silver over these everyday necessity items. Put simply gold (and silver) are “long term stores of value”.
Some key advantages over other tradable items include:
– Or the amount of wealth you can store in a very small space.
1 kilogram of gold is about the size of a modern smartphone and is currently valued at around NZ$90,000. You’d need to buy a lot of water, tools, or wine to store the same amount of value!
– Even if you did have space to store enough of the basics, you’d also need to consider their durability. How long would water, food or wine last without going off or at least lessening in quality? Gold and silver in contrast are close to indestructible.
There are a number of other advantages too. Read more here: What Good is a Bar of Gold When the Shelves are Empty?
See the section headed:
“Aristotle’s reasons why gold is money”
“A good form of money must be: durable, divisible, consistent, convenient, and have value in and of itself.”
How Would Purity of Gold and Silver Coins Be Authenticated in a Societal Breakdown?
Finally in answer to the final part of the question: “the average person could not be expected to have all the technology required to authenticate the purity of materials claimed to be silver or gold”.
That is the benefit of buying a well known and widely accepted gold or silver coin.
Here’s our thoughts on this point also from a previous post: What Use Will Silver Coins be in New Zealand in a Currency Collapse?
“Your first thought may be that most people on the street today wouldn’t even be able to recognise a Canadian silver maple or an American silver eagle 1 oz coin!
However in a currency collapse situation where trust in all fiat money evaporated then it would be a fair assumption to make that people would learn in a hurry what various coins looked like.
Well known coins from national mints like the Royal Canadian Mint, US Mint and Perth Mint in Australia, would most likely be more trusted to be authentic and pure.
Odds are we would also have seen a sharp rise in the number of people buying gold and silver in the lead up. So there would be more knowledge about gold and silver coins than that which exists here currently.
Therefore a Silver Coin From a Well Known Mint Should be a Pretty Good Bet”Read more: Should I Buy Legal Tender (Face Value) Gold and Silver Coins?
When Exactly Are Gold and Silver Most Important and Useful?
In a currency or societal collapse, gold and silver may be useful as a means of exchange. But they are probably most important and useful in the aftermath of crisis.
If you are fortunate enough to have amassed a decent level of wealth, you wouldn’t be able to store your pre-crisis wealth by buying piles of everyday necessities.
Consider instead that you have stored a decent percentage of your wealth in gold and silver.
Once the crisis is over, these precious metals (which have been money for thousands of years) will likely still hold value. So may help you to carry your wealth over into the new economy that begins.
(For more on this idea see: Why Sleeping Beauty Should Own Some Gold or Silver).
But even if we don’t get an apocalyptic societal collapse scenario (something we think is less likely), paper currency will likely continue to be devalued due to the massive global debt load. So the purchasing power of gold and silver will conversely most likely increase in the coming years – albeit probably not in a straight line.
That’s why we say gold and silver are wealth insurance with upside. You get protection from an extreme crisis scenario. But you also get the likelihood of upside even if such a scenario never plays out.
Read more: This post also touches on some similar questions: Why is Gold More Valuable Than Worthless Paper
Editors Note: This article was first published 27 February 2018. Last updated 16 June 2020 with new information regarding COVID-19.