We get lots of questions from the public about precious metals.
Some people are curious about the basics. Others are skeptical about the case for owning gold and silver. Still others are longtime customers who have highly specialized inquiries.
Here we will answer a few of the most common, most broadly relevant questions we get…
QUESTION: What Product Is Best for Barter?
ANSWER: Among the reasons for owning precious metals is a potential failure of the unbacked Federal Reserve note “dollar,” economic collapse, or other events that create a need for an alternative means of exchange.
The most practical precious metal for barter is silver because of its relatively low cost compared to other metals.
So-called “junk” silver coins, which are dated prior to 1965 and are 90% silver, are among the more popular silver forms for barter.
Other forms include silver rounds, silver bars, and fractional silver such as Geiger and Valcambi bars (e.g. Valcambi CombiBar).
These two brands, among others, also offer fractional gold options.
Another option for barter are the fungible Goldbacks which are sheets of fine gold infused into plastic that make them appear like gold banknotes.
The one Goldback (GB) denomination is made of 1/1000th of a Troy ounce of 24k gold, a 5 GB is 1/200th of a Troy ounce, a 10 GB is 1/100th of a Troy ounce, a 25 GB is 1/40th of a Troy ounce, and a 50 GB is 1/20th of a Troy ounce.
While it makes sense to own some small increments of fractional gold and silver to facilitate barter, don’t put big money into these items, as the premiums due to minting costs are necessarily higher. That’s where gold and silver bars really shine because of their low premiums, low spreads, and high liquidity.
QUESTION: Is it a Good Idea to Move Some Gold into Treasury Bills or TIPS Before the Fed Cuts Rates Again?
ANSWER: It’s true that short-term Treasuries pay a higher nominal return today than they have in over two decades.
It’s also certainly possible that the 5% yields currently offered on T-bills won’t be available much longer. Does that mean they presently are a good value? Not necessarily.
As the fiat Federal Reserve note continues to depreciate, investors will find themselves vulnerable to suffering real losses – even on investments that generate nominal gains.
A 5% yield won’t keep pace with current inflation by some measures, let alone protect you from a potential rise in price levels.
If the Consumer Price Index (CPI) were calculated the same way today as it was in 1990, the government would have to admit to an inflation rate of over 7% – far above the 4% it has recently reported. By the older measure, the inflation rate over the past two years reached well into the teens.
Treasury Inflation Protected Securities (TIPS) may perform better than conventional fixed-rate bonds in an environment of rising inflation, but even that isn’t guaranteed.
The actual yield on TIPS doesn’t rise automatically with inflation. Instead, the principal adjusts according to changes in the CPI.
The biggest problem with TIPS is that the CPI tends to understate inflation – a reality that is rarely disputed anymore.
Over the years, the formula for calculating the Consumer Price Index has been tinkered with for political reasons. By suppressing the CPI, the government reduces the Cost-of-Living Adjustment it has to pay out every year to pensioners, especially Social Security recipients.
Unfortunately, there is no single investment that is guaranteed to deliver inflation-beating returns every single year. But the longer the time horizon, the greater the certainty that gold will retain its purchasing power.
Take the last 100 years, for example. During that time, the price of an ounce of gold went from $20 to $2,000 per ounce... that’s reflective of a 99% decline in the purchasing power of the Federal Reserve note versus gold.
