Hedging Economic Bets, Why I Buy Junk Silver and Silver Rounds

by suburban on February 27, 2013 · 7 comments

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 Hedging Economic Bets, Why I Buy Junk Silver and Silver RoundsAs I can afford to do it, I have been buying silver.  Mostly silver rounds. I have a small stash of silver rounds primarily in hopes of hedging my bets against economic downturn or to hopefully capitalize on rising prices at some juncture, assuming they go above the current spot rate.  I also have to preface this article, with that I know very little about the precious metals market, and I probably should be deferring to someone with more knowledge, however, I don’t think I will need to get that technical.  My experience is based on speaking with other like minded individuals who have similar mindsets about the economy.

That said, while the amount will remain undisclosed, I continue to buy, and here is why…

Why I buy Silver Rounds

I honestly started buying silver rounds because I could not afford gold.  I didn’t even know why I was buying silver, except for the idea the economy was on a downward slide.  Then I started poking my nose around at smaller investments I could make that might yield me some sort of guaranteed return.  I really couldn’t find any.  Nothing solid, nothing that appealed to me.   Savings accounts are yielding 1/2 of 1% if you are lucky at best.  And I wanted to make incremental investments as I could afford it.  Enter, silver.  I could buy it online, I could buy it in pawn shops, I could buy it in coin shops, I could buy it from friends, etc.  I thought it could or would be a good way to prepare myself for the “bad times.”  As my prepping evolved, I first believed silver would be good for barter, for purchasing goods and services, for selling as an investment, etc.  I also recently learned that if you are going to sell your silver back and make a profit, you have to pay capital gains tax on it with the exception of selling Silver Eagles or Canadian Maple Leaves.  Unless you sell them privately, of course.  Either way, I am hoping they can provide me with a return on my investment that will either feed me, protect me, or provide me with the items I need in a pinch if I need them.  Currently the price of silver per ounce is just over $28.00.  When buying the silver rounds, I think you also have to know  going in that you are going to pay more than spot price.  Usually 10% – 20%.  And, that if you sell them later to a coin dealer, pawn shop, etc, you will take a small hit of 5% – 20% off spot, so you will be taking a larger hit, unless, of course spot price goes up to a level whereby you are making a profit.  It has been hovering around the 28 – 33 dollar mark for sometime though.  Rumor has it, that it also is artificially being kept low, and should be about 50 dollars an ounce.  If that is the case, then I want to keep buying until the market is not going to be held down any longer…

Why I am  starting to buy Junk Silver

The flip side of silver rounds, there is Junk Silver…  Most preparedness minded people have heard of junk silver, and have contemplated buying it for various reasons as well.  I would assume, some of the reasons mentioned above seem to be similar.  However, the philosophy with junk silver is slightly askew for me from the above description.  See, junk silver is pre 1965 coinage (Quarters, dimes, and nickels) that are 90% silver, yet still the familiar monetary format everyone is used to trading for goods and services.  Why is this important.  Well, by today’s standard, those 90% junk silver coins are roughly worth the following:

  • Quarter – Roughly $5.00 
  • Dime = Roughly $2.00
  • Nickel = Roughly $1.60

Now, why is this important?  Well, as stated, they are familiar denominations and types.  Second, if the price of silver goes up, so does the value of the quarter, dime, or nickel. Again, why is this important.  Well, in the event the economy takes a slide, and the price of silver, lets say, goes up five times it’s value, I can use a nickel will be worth the equivalent of eight dollars, and I can use that to purchase food, without having to worry about using a silver round and having the farmer or merchant ‘make change.’  It will also allow for many other barter opportunities with smaller denominations as well.  The security factor in here, as well, is that a would be intruder or thief might just mistake it for a “jar of change” and let it go because it is too heavy to carry.  Just thinking out loud with that one.  Another advantage is that with Junk silver you would not have to carry much of it, and it is easy to hide on your person.

Either way, as inflation continues to rise, unemployment stays high, it seems assumed that precious metals are going to remain at a higher rate than they were just a few years ago.

How much junk silver and silver rounds should I buy?  Or you for that matter?  It is suggestive, depends on what you are comfortable with, how much research you do, etc.  Some coins are worth more than others, based on rarity, year, etc.  I personally suggest staying with he most common as the denomination and actual silver spot price will be what is most widely recognized in my humble opinion.

Additionally, my research has shown, and please keep in mind it is limited, that silver will continue to outpace inflation in the long term.  Again, I reiterate that I am no expert, but it sort of makes sense to me.  Other areas that might push up the cost of silver based on my reading are it’s use to purify air, water, in electronics such as computers and mobile phones, and it’s antibacterial properties.  Industrialization of emerging countries also is a factor in the price rising.  Countries such as China and other nations are also consuming more precious metals for their electronics, ownership of bullion, etc.

In conclusion, I think the cost of Silver and other precious metals are going o go up and I am going to continue consuming it to try and hedge my bet(s) a bit… How about you?  What are your thoughts on silver?

 

 

 

 

 

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{ 7 comments… read them below or add one }

texaspatriot March 18, 2013 at 10:56 pm

Good read.  I am in the same boat.  I have a little more background in finance and economics, but very much an amateur in terms of buying silver coins.  I budget a set amount each month and purchase a mix of silver eagles, maple leaves and junk silver.  In just three short years I have accumulated a sizeable amount.  I started buying it in 2010 when it was about $18 per ounce.  When it peaked out at $50 in mid 2011 I resisted the urge to sell it and kept buying it.  I selected 20 different mutual funds, stocks and other investment instruments to compare against my silver investment.  I outperformed almost every one.  Yes, it is a short investment window, but still a testament to the current financial state of this country.  The national debt is only going to go in one direction and we all know it.  The US currency in its current state will eventually collapse on itself.  If you understand fundamental economics, rocket science is not needed, just elementary level math.  Keep spreading the word.        A concerned patriot

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suburban March 19, 2013 at 8:20 am

texaspatriot Thanks!  The one thing I have not done is put myself on a consistant schedule like you have to purchase a set amount every month.  I should do that.  
Glad to hear you’ve been able to out perform the funds?  Could you share the funds?  You don’t have to give an exact quantity, but could you share what your average spend is a month on silver?  Just trying to gauge… 
Thanks for commenting!

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texaspatriot March 19, 2013 at 10:11 am

suburban texaspatriot 
For the sake of my own privacy, I will say that if an econmic collapse occurs, my family will be able to weather the storm for quite sometime.  In a nutshell,  my three year rate of return has been about 19%.  S&P did about 13%.  Silver did not perform well in 2012, down about 17% while the S&P was up 13%.  Is that discouraging?  Not too me.  I just see it as a good time to buy more silver.  The stock market is so reactive to baseless information and valuations.

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suburban March 19, 2013 at 11:02 am

texaspatriot Awesome information.   Thanks!

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texaspatriot March 20, 2013 at 12:30 pm

Another point I forgot to mention. I think in terms
of portability, one can accumulate too much silver. Sounds contradictory, but
here me out. All of us preppers have our “bug out” bags, sacks, cars,
etc., but the situation might not always allow an individual or family to cart
around large volumes of precious metals. There are two mains scenarios if the
economy collapses. One is stay put and defend the castle either on your own or
with a co-op or get the hell out of dodge and as far away from a major city as
possible. Second scenario means having to make some decisions about the most
important provisions to take and more importantly, the ones not to take. My
suggestion is once you have an amount of silver coins that begin to tip the
scale in terms of weight and/or portability, start trading for incremental gold
coins. I would suggest 1/4 or 1/10 oz gold american eagle. You can reduce your
weight load by almost a pound with a 1/4 oz gold coin. This is not meant to
replace silver, but merely a way to keep on hand one of your most valuable
assets in a bad economic situation. Yes, water, food, shelter and firearms come
first, but commerce will need to take place at some point in the future when
one of those provisions runs out.

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suburban March 20, 2013 at 1:28 pm

texaspatriot Good points.  I would also add that if you are one to cache gear, that caching a set number of ounces or number of coins, depending on the denomination may also be an option so that you do not have to carry a heavy load off the bat, assuming you are bugging out, as well…

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texaspatriot March 20, 2013 at 2:47 pm

suburban texaspatriot Yep…right on point.  My bug out bags already have a set number of bullion in each one.  As a family, we can handle a loss of one or two bags and still be fine.  Spreads the risk load quite well.

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