The Gold Sovereign

Gold Sovereign

Gold Sovereign

 

When people start to look into precious metals, I understand how gold can feel kind of prohibitive with its high price (compared to silver) and the fact that sometimes it’s hard to get it in small increments.  If you don’t have much money to spare picking up a few silver rounds or some junk silver at the end of the month seems more reasonable than looking at gold.    Plus if you’re looking at hoarding precious metals for barter potential, silver seems to make more sense due to the difficulty of getting reasonable increments of gold.  The gold sovereign from Great Britain is a good option for buying a little bit of gold at a time, along with Swiss and French 20 Franc pieces.

The coin is .23 ounce (so just about a quarter of an ounce) of 22 karat gold.   Just like the French franc there’s a bit of copper in there to make it more durable for circulation.    The front has the Queen with something in Latin and the back has St. George slaying the dragon, which is pretty sweet.    St. George is the patron saint of England and according to legend while on a crusade he slayed this dragon that was terrorizing a town and the town converted to Christianity.    There’s all kinds of depictions of this legend in religious imagery, particularly in the east (St. George is also the patron saint of Greece and Georgia, as the name suggests).

The markups on these coins aren’t too bad.  I just bought some at about 4% over spot and just recently they jumped up to 7% as physical gold is in higher demand.     You definitely get a better deal when you buy an ounce or more, but it’s not bad, all things considered.     I think looking at these coins (as well as the Francs) are a good way to build up your gold position a little bit at a time if that works best for you.

What’s Going On With Gold and Silver?

When I woke up Monday afternoon (I work nights) I made my usual rounds on the internet, which includes Yahoo finance.  I saw an article about gold taking a beating and clicked on it and couldn’t believe what I what I read – $23 silver and gold in the $1300’s.   I never thought I’d see those prices again.    I did buy a bit of both metals last week when the prices started to decline, should’ve waited a little bit.    I went to Kitco to see the day’s chart and saw that there was already a pop-up ad asking basically asking if I just lost my ass on gold – I’m not sure what they were selling, but I was impressed with their speed, whatever it was.   I also saw a few articles talking about how the party was over with gold.     It’s kind of a bizarre feeling to wake up with the exact same things you had the day before and then to have it suddenly be worth a lot less.  :::shrugs:::

Either way, I’m really not too worried about this.   I’m looking at this as a great opportunity to acquire more.   I’ll admit I’m a little dismayed with the mining/streaming stocks that I have and starting to get antsy about the silver ETF’s that I bought last fall.      I still believe in the fundamentals of both metals.

I listened in on a conference call/webinar thing tonight talking about the precious metals market and from what I’m hearing is that many dealers of physical metals are seeing a lot more people buying and virtually no one looking to sell back their metals.  If the market was really melting down, people would be falling all over themselves to get out.     Also with most dealers Silver Eagles are about four weeks behind on orders and Silver Maples about two weeks behind.   Right now the premiums over spot are a little higher than usual, which reflects the high demand for physical metals.    Again, if the market was really falling apart, dealers would be trying to get rid of them too.    I’ve also heard reports of coin shops refusing to sell bullion now at anywhere near spot, thinking that they’ll be able to get a lot more in a short period of time.  Makes sense.    I also noticed that one small online bullion dealer conveniently picked Monday to update their server, even after just announcing that they were able to fill orders again.

Also from what I understand, virtually no physical gold (or silver) moved in this – it was all shuffled around on paper and the gold remains sitting in a London warehouse, where it’s been for quite some time.

There’s some real reasons out there for the precious metals prices to go down a little bit.   The Indian government was talking about placing a tax on gold (India is the largest consumer of gold), the US Dollar is doing good right now, the markets are inching up and unemployment is down,  Chinese growth is a little slower than expected and there’s a possibility that Cyprus will have to sell off her gold in order to pay off part of the debt.   Sure that will put some more gold on the market, but the big thing there is that if that’s the deal that they strike with Cyprus, it will probably be the deal they’ll strike with Greece, Italy, Spain and Portugal too when their day comes.

So I think instead of fretting over this I’m going to take this wonderful opportunity to build my position on precious metals at a price I believe to be a bargain.    Maybe this is a good time to splurge a little bit on the boutique rounds instead of the government issued ones or the low-price wooden nickel ones.   I was looking at some Andrew Jackson ones earlier today…

 

 

Platinum and Palladium: The Other Precious Metals

Gold and silver usually get the spotlight in the world of precious metals so sometimes platinum and palladium get looked over.   I’ll admit that when I gave a presentation on PM’s in February I spent no less than an hour talking about gold and silver and probably less than five minutes talking about platinum and palladium so I’m guilty of it too.    Still, platinum and palladium have been outperforming silver and gold and that trend could continue.

In the speech I gave I basically said that from an investment perspective platinum and palladium had some of the advantages of gold and silver, a few distinct disadvantages and different dynamics.

Like gold and silver, both platinum and palladium are good ways to have a portable tangible asset with a lot of value.   Today (April 3, 2013) platinum is about $1560 and palladium is about $760.

Just like gold and silver, the demand is worldwide and they’re traded on the commodities exchange.   Someone always needs these metals, as they’re extremely important in the industrial world.   A small percentage of platinum is used for jewelry and investment and everything else is industrial demand.   This differs from gold and silver, where about 10% of gold is used for industrial purposes and silver demand is almost evenly distributed.    Theoretically speaking, if worldwide industrial demand goes up, so will these metals.  If it goes down, they could go down.

One of the downsides to these metals that I gave was that they’re not as liquid or as widely recognized as gold and silver.  You can always sell it back to the bullion dealer you purchased it from, but it might be hard to get a fair price in your local area.   Many people keep gold and silver for the potential to barter if the economic system collapses – most people couldn’t tell you the current spot price of gold and silver, but everyone knows that gold and silver are valuable and at least that gold is more valuable than silver.    There isn’t that same level of cultural familiarity with platinum and palladium.   Besides, if the S really HTF I’m sure the demand for both of these metals would be way down.     I can’t see either one being very good for barter.

The supply side of platinum and palladium is promising for investors because both are rare and mining is prone to disruptions.   South Africa is the leading producer of platinum and second largest producer of palladium.   Russia is the largest producer of palladium and second of platinum.   There’s some of both metals mined in the US and Canada, but for all practical purposes Russia and South Africa rule the roost.   Both countries are known for corruption and inefficiency and the primary palladium mines in Siberia are only accessible for a few months out of the year.    There was a labor dispute in South Africa that shook the platinum market earlier this year.

According to some reports, South Africa and Russia are planning on forming a cartel similar to OPEC around these metals.    I purchased a couple ounces of palladium a couple years ago when the price dropped due to the Russian government dumping some of their stockpile on the market in order to pay some bills.  I guess it’s more responsible than just taking on more debt, like some other governments….

Oh, platinum is so rare that all of the platinum ever mined could fit into a room about the size of the average living room.   All of the gold ever mined would fit into a cube about the size of the infield of a baseball diamond.   So if you have a little bit of platinum, you really have something special.     It takes about 10 tons of platinum ore to get one ounce of pure platinum.   It takes about 3 tons for gold, to put it into perspective.

There are also people who make a living salvaging palladium from catalytic converters (the primary use of palladium – there’s a couple grams in each one).   When the price of palladium shot up a few years ago, there were even reports of theft, kind of like when copper goes up wire theft goes up.

Ok, I’ve kind of been shooting from the hip on this one so I’ll sum up with I think that platinum and palladium are worth looking into for investment purposes and diversifying your physical assets but maybe not the best idea if you’re stacking PM’s solely under the premise that all hell will break loose someday.

The Incredible Malleability of Gold

capitol

Two weeks ago I gave a speech to a local preparedness group about gold and silver.   I mentioned some of the properties of these metals that set them apart from other metals and make them more than just shiny pieces of metal.   Someone recorded the speech, I’ll probably post it when it surfaces.  It’s about an hour and a half, so it’s a long one.

Among one of gold’s properties is the fact that it’s so malleable, meaning it can be hammered out in to very thin sheets.  One ounce can be hammered out by a skilled goldsmith to about one square meter.    The dome of the Iowa State Capitol is covered in gold leaf and I was surprised to find out that there’s only about 100 troy ounces of gold up there (a little less than 7 pounds).   Sure, that’s a lot of gold but that’s also a lot of surface to cover.   A brick of gold small enough to hold in your hand can cover that.    Pretty amazing.

There’s Nothing I Love More Than Some Good Siege Literature

I’ve been off work for a couple weeks and have had a lot of time for reading.    Among the things I read was Anna Reid’s Leningrad: The Epic Siege of World War II, 1941-44.  I briefly mentioned the siege of Leningrad in Wolverines: Reflections on Red Dawn and had it in my mind, so I figured it would make some great Christmas-time reading.   I’m not going to review the book, but I think it’s a good idea for those of us into the world of preparedness to read and study accounts of times in human history where the shit really hit the fan for people instead of just fictional accounts.  I can’t think of much else more horrific in modern history than the sieges of Leningrad and Stalingrad besides Nanking.  I’m sure there are a ton of other smaller and equally brutal events that have been forgotten amongst the widespread destruction of the past century.  

After reading it I increased my food storage and was thankful that I have the option to do that, being born in this place during these times.  Let me list a few things off hand that the citizens of Leningrad ate to survive during the siege:

– Humans.  They ate corpses and there were even some cases of people killed for a bit of “long pig”.

–  Dogs.   There was one story of a family with a much-loved pet dog who had to kill it and eat it.  They gave the intestines to a friend for his help slaughtering it.

– Cats.  

– Horses. 

– Rats.

– Pidgeons.

–  Joiner’s glue.  It’s made from animal parts.

– The paste from book bindings.  It’s flour and water.

–  Sawdust bread.   Certain types of sawdust was added to bread to stretch it.

–  Crumbs scraped from cracks in kitchen tables.

–  Cattle feed, like cakes of flax seed.

–  Wheatberries recovered from a sunken ship that were moldy.

–  The paste from behind wallpaper.   Flour and water.

–   Leather

–   The dirt from underneath a confectionary that burned down.   Apparently there was charred sugar in the dirt.   People actually paid for it too.

–  Flour scraped off the walls of a bakery and from underneath the floorboards. 

The book also mentioned the citizens foraging for dandelions and nettles in any available space.  

Cash became worthless, but gold and silver still had value.   It’s kind of funny how when you get into precious metals you really notice these things when you read historical accounts.    Unfortunately for the folks who had gold and silver in Leningrad, the price of food and some crucial bribes skyrocketed beyond the cost of the metals and luxury items.  I’m a big fan of precious metals but from a preparedness standpoint I think you’re a lot better off trying to acquire the things you think you’ll exchange them for in a barter economy now than counting on having all kinds of doors open for you because you’ve got a pocketful of silver dimes.   I also think it’s a good idea to try to be able to be the guy (or gal) with some kind of valuble skill/product/service on the receiving end of the silver than just a consumer with silver to exchange.   Money, even silver, runs out if you don’t have a flow of it coming in.    I think the best way to think of precious metals from a preparedness standpoint is for all of those little things you’re forgetting.  

At any rate, I think it’s worth digging into the past to find out how people coped with times of scarcity and calamity.   I’m pretty sure that the contemporary writers of dystopian fiction get a lot of their ideas from these kinds of historical events.   

 

French 20 Franc Piece – A Good Way To Get a Little Bit of Gold

 

 

Yesterday I posted Investing in Silver 101 and I mentioned that one advantage of silver over gold is that it’s a lot more practical to deal with small amounts of silver than it is with gold.   If I wanted to trade somebody metals for something currently worth around $30, I can do that with an ounce of silver.   $30 worth of gold would more or less be a tiny flake and very impractical for barter.  Silver dimes, quarters and half dollars make barter with silver a lot more flexible.

You can get gold in increments smaller than an ounce and the French 20 Franc coin is one way to do it.   Each coin is 90% gold and contains .1867% of an ounce of gold.  I believe the other 10% is copper, which makes the coin more durable for the wear-and-tear of exchange.   The size of the coin is similar to a US nickel.     The coins with Napoleon were minted in the middle part of the 19th Century and the ones with the rooster (national emblem of France) came from the beginning of the 20th Century.   At today’s (8/22/12) prices, you can expect to pay somewhere in the neighborhood of $350 for one of these coins.

With gold at over $1600 an ounce, buying it might be a little intimidating for the average person but the 20 Franc piece lowers the entry point into the world of gold.   I think it’s also interesting to note that this is an example of a currency vanishing but the coin still retaining its’ value based on the metal content.   What do you think a 20 franc note is worth these days?  Absolument rien, mes amis!

I’ll give my gut feeling on what one of those coins would be worth in an agrarian barter economy:   My guess is that hundreds of years ago this amount of gold would have been able to get something like a day’s work from a skilled craftsman, a sword, maybe some kind of livestock or a month’s rent in someplace fairly modest.