While I was sorting through some prepper gear doing inventory, I stumbled upon a 1 ounce gold Krugerrand that I bought in 1999 for $278. (Apologies for the poor image quality.) I had tucked it away in a back-up wallet in bug out bag. The wallet also had $360 in it, an expired driver’s license, expired concealed carry permit, and an ATM card for a bank that no longer exists. Also in the bag were eight pre-1965 quarters Scotch taped into a stack. These coins are $90 percent silver.
I remember buying the gold coin because I was proud to have had earned $500 working on a side gig. Y2K was coming up, and I wanted to be prepared. So I dedicated $300 to buying some gold and silver. I think I selected the Krugerrand because it cost less than the Gold Eagle and because I had read about them in some prepper book.
Let’s look at how the gold, silver and $360 in cash have performed since then:
1999 versus 2021
One ounce of gold has jumped from $278 (which included a dealer markup or premium) to $1,962. That means that coin is now worth 7 times as much today as it was then. Even with inflation, it would buy 4 times as many goods today as it would then.
An ounce of silver was $5.21 in the summer of 1999. Yesterday, an ounce costs $24.96, and the premium likely puts that over $30. So silver today is worth about five times what it was. It’s interesting to note that Silver has gone up about the same as the S&P 500, but gold has out-performed the market.
Of course, the $360 is still worth $360, but based on the CPI, it would buy the equivalent of $216 worth of goods measured at 1999 prices. Thanks to inflation, the $360 in cash has lost 40 percent of its value in the past 22 years.
Cash would be more useful than gold if I was forced to bug out or if the Y2K bug had caused the computer and electronic failures many people feared, but I would have fared much better over the long run if I had spent that $360 on another gold coin and a couple rolls of junk silver. Instead of $360 in old bills, I would have coins worth the equivalent of $2,500 in today’s money.
In hindsight, I wish I had bought ten ounces of Gold and four or more rolls of quarters. Heck, I wish I’d gotten a second mortgage and bought 100 ounces of gold. Either way, I expect my wife would have killed me.
40 Percent Inflation
Imagine going to the bank, cashing your paycheck and getting $1,000. The teller says “how do you want it?” and you take six $100 bills and the rest in twenties. On the way home, someone picks your pocket and takes the $400 in twenties, leaving you with just $600.
That’s what inflation has done over the past 22 years: It has stolen 40 percent of your money.
Keep in mind that most of the past 20 years, inflation has averaged less 2 percent. Now, imagine how quickly inflation of 6 or 8 percent will reduce the money in your pocket. It’s like the pickpocket taking more and more out of each paycheck, leaving you with the ability to buy less and less.
If inflation reaches 15 percent, your money will be worth another 40 percent less in just three years. If you live paycheck-to-paycheck, you will be able to afford 40 percent less food, 40 percent less gasoline, and 40 percent less clothing and home goods. You’ll probably cut out dinners out, stop buying coffee, bring a bag lunch to work, cut back on your streaming services and subscriptions, and hold off on buying anything new.
That’s what lies ahead of us if they don’t get inflation under control. From what I can see, it looks like the government plans to stop inflation by making sure your kids get vaccinated. They certainly are not taking the rapid growth of the monetary supply seriously.
Precious Metals and Inflation
Will my gold coin go up another seven times? Will it be worth $14,000 in a few years, or will I have to wait another 20? No one knows what gold will be worth in the future, but because we are in the midst of inflation, it’s a good bet it will be worth more in a couple of years. People traditionally held gold and silver to preserve one’s wealth during inflationary periods. As you can see, my one coin not only preserved my wealth but caused it to grow.
I can’t go into my local gas station, pump $35 of gas and expect them to take my eight silver quarters. But I can go to a coin store, sell the quarters, and walk out with $35. Then I can use that money to buy gas or groceries.
Precious Metals for Preppers
There are preppers that believe silver coins, especially dimes and quarters, will form the foundation of a post-collapse monetary system. I don’t think this will happen immediately, when there are massive shortages and the phrase “you can’t eat gold” proves itself accurate. I think it could become a useful medium of exchange a few years down the road. That assumes you are lucky enough to survive and things have calmed down to form some new version of civil society where there are markets and store fronts.
I guess you could say that the money I might have spent on precious metals was invested instead in food, tools, and our prepper property. I think that’s a wise choice, and I would encourage you to make sure you have plenty of things that will help you survive, like food and ammo, before you buy gold and silver. There may come a day when I wish I had another $1,962 worth of rice, beans, powdered milk and Spam instead of an old South African gold coin. I hope not, but the way things are going, the chances I may find out are increasing.
For more information, read our article on precious metals for preppers.