Why do we assume that gold/silver will go up in value?

greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread

I know that throughout history, gold and silver were the basis of ours and most others currency, and that our money used to be backed by both.

If y2k plays out and creates a worldwide depression, panic, war, etc. Each country will become an isolationist society within itself. And for a very long time, there will be no trade. Military governments will take control, and put people to work as they see fit. There is no guarantee that our "new" money will be backed by gold, and in fact it hasn't been for years. The value of gold is established internationally, as one currency plays against another. Without the international aspect of trade our government could simply isolate itself, and continue to back our new money with IOU's as they currently do, and deem gold worthless.

-- Loco (PocoLoco@hotmail.com), February 13, 1999


The value of gold/silver can also be established locally in a time of crisis. Most people know gold/silver do not grow on trees (or ar they made from trees), it takes a great deal of capital and labor to produce these metals. Scarcity will determine value in times of crisis. I still belive 24 rolls of Charmin will be worth more than a $5 bill or a 1 oz. silver round come this time next year. Guns and ammo should skyrocket, etc.... Think barter goods that you can use or that will hold their value. Gold/silver will hold their value (heck silver is up almost 20% in the last month, it may have out preformed Amazon.com?!)

-- Bill (y2khippo@yahoo.com), February 13, 1999.

Partial answer:

Gold has traditionally held value relative to the things that could be purchased with it. One ounce of gold now will buy what an ounce of gold would buy hundreds of years ago (if you can find something.....food, clothing.....that has remained unchanged over that period of time.

In times of monetary deflation, gold will still buy only the things that it bought before that deflation. Script -- paper money, coin of the realm -- will buy more. So, the price of gold actually goes down relative to paper money. If you believe that we'll have only a deflation (depression), then gold may not be a good investment.

But, in times of chaos, gold is a recognized standard. Whether or not the government chooses to back their currency with gold is not an issue. The issue is that people will accept gold and provide services or things in return. Example: many time refugees have been able to escape (China is an example) only because they have gold to purchase passage where the providers of that passage would accept only gold or world class currencies.

In the event of complete collapse, gold has been the only means of trade.

The flip side of deflation is inflation. Gold holds it's value, relative to 'things' in inflation, so it increases in value with respect to cash.

Now, those putting money into gold or silver are essentailly betting that either we will have chaos, in which case paper money will be useless and unacceptable, or that we will have inflation, perhaps even hyperinflation.

In all likelyhood, we will have a depression. This argues for a reduction in the value of gold. The question is whether the situation will become chaotic or whether the government may print too much money in an effort to halt depression and so send us into an inflationary spiral. By the way, if we have a very severe oil crisis (very possible) then we can expect the price of petroleum products to skyrocket, causing plastics, and transportation to shoot up.

This could happen at the same time that a lot of companies are going toes up and a lot of people are being laid off. The result is a recipe for chaos as people have less and less, and things cost more and more. [Remember, the ratio of gold to things doesn't change much, so gold becomes a purchasing tool.]

-- auric (goldfingers@bond.com), February 13, 1999.

Good points Auric - can you comment on my new thread on hoarding cash or gold?

Thanks, Andy

-- Andy (2000EOD@prodigy.net), February 13, 1999.

Gold has its own intrinsic value that does not corode or erode. A further question is: What will be the supply in your area to facilitate trade with money that has integrity?

-- Finding (sspicer@nas.net), February 13, 1999.

Warren Buffett the second richest man in America has now purchased 129.7 million ounces of silver. Thats enough proof for me to buy. Last fall I received one ounce silver Libertys in 5 business days from the mint. Not one 1999 silver Liberty has been shipped to anyone. I ordered first business day of year and still waiting. Just ordered 2000 more yesterday and the price has went up .70 in two months per coin. On February 7 the mint started a quota system on distribution for the first time in history. Check out the prices on April 1 and see if they have not skyrocketed. Today you can buy 1/10 oz Liberty gold pcs. for $33.50 in quanities of 50 pc. rolls. Silver 1 oz libertys are $7.65 each in quanities of 500. Many people that have been investors in precious metals for years are predicting silver to go anywhere from $60.00 to $110.00 per ounce in the next year. And some even higher. If you invested $38,250.00 today on 5000 ounces of silver and it does skyrocket like Warren Buffett seems to beleive you will be one wealthy dude in a short time.

Even if Y2K is a bump in the road GE is getting ready to mass produce a type of electric generator that will supply homes with 35kw of power from propane and other fuels. These units will someday provide 80% of homes with electricity. They are suppose to initially cost around $9000.00 each and drop to $3500.00 each after more homes get them. Silver will be used in electrical transmission in the unit as it is the most efficient means. I think its a nobrainer. And Warren Buffett ain't no dummy.


-- flierdude (mkessler0101@sprynet.com), February 13, 1999.

It is true that most people nowadays don't know what to do with gold and silver. That is the legacy of generations of fiat money ("funny money") backed by nothing more than the taxing power of a government.

After TSHTF, gold and silver (and platinum and palladium) may or may not be useful.

After all, it took mankind several thousands of years to settle on the value and utility of precious metals as money.

If it doesn't have value right after Y2K, it will eventually -- but will that be months, years, centuries.

The only thing in the meantime is "I'll trade you a pig for that bicycle chain." Barter is a pain in the ass, and that's why precious metals as money is superior. It may take time for that to sink in, again. Paper money will be ass wipe.

-- a (A@AisA.com), February 13, 1999.


Listen to Gary North on the Art Bell talk show, next Friday evening, the 19th. He will explain it very well.

-- (@@@.@), February 13, 1999.

Flierdude: For more information on the unit you wrote about there's a website www.plugpower.com that markets the unit. How affordable and practical it will be for the average homeowner to afford will remain to be seen. You still need energy to produce energy.

Bill: I agree with you, ammo, TP, any items imported such as sugar, spices, coffee (almost anything for that matter), will be in big demand for barter. Good work boots, and walking shoes will also be in big demand since we will be doing more physical work and on our feet more. I just bought 2 pairs of hiking boots at Big 5 Sporting Goods that were close out for 75% off list price. All it takes is a pocket full of money...something a lot people don't have. I'm looking forward to this summer because I will buy all I can at garage sales and flea markets.

-- bardou (bardou@baloney.com), February 13, 1999.

Keep in mind that in a depression people will sell their jewelry and fine silverware. Also, silver is used industrially and that will likewise decline.

-- Joe O (ozarkjoe@yahoo.com), February 13, 1999.

If there is no civilization and no commercial activity, then gold will have no significant value. But it there is significant commercial activity and trading activity, the precious meatls will have great value. No one can say now how it is going to play out. The value of gold will depend upon the level of commercial activity, but only after the period of turmoil has passed. Before that, showing a gold coin will only get you dead.

-- dave (wootendave@hotmail.com), February 13, 1999.

Moderation questions? read the FAQ