Because I wrote about gold and silver while they were roaring upwards, it’s only right that I post about Thursday’s crash, where silver lost 8.2 percent and gold closed below $4,700 for the first time since Feb. 2. Silver closed at $72.68 after dipping below $66 in early trading. Gold is still up for the year, but silver is close to breaking even.
Since precious metals, especially gold, have been considered a “safe haven” asset, you’d think prices would shoot up as war breaks out, but that hasn’t been the case. The reasons are many, and while the war is not a direct cause, it is an indirect one in more than one way.
According to the Wall Street Journal, “Gold has become the latest victim of rising inflation expectations and dimming hopes of global interest-rate cuts.” And why are hopes of rate cuts dropping? Because of the war, which is causing the price of oil to skyrocket, which is expected to result in price increases, which results in the Fed keeping rates high.
The Journal also points out that the price of other metals is falling, from high-flying platinum to common, everyday metals like copper and aluminum.
I think silver is dropping because buyers are holding their breath to see how low it goes. Why buy at $75 when it was just trading at $66? Maybe it will come back down, or drop below $60. But if we see some resistance, prices could well rise as buyers return to the market and “buy the dip.”
What do Silver and Gunpowder Have in Common?
Another reason silver price may be affected, which none of the mainstream media are covering, is the rising price of nitric acid. What’s that got to do with silver and gold? It’s a key ingredient in refining precious metals, whether the source material comes from the Doré bars supplied by mines, from your grandmother’s sterling silver tea set, or those Kennedy half dollars that contain only 40% silver.
Right now, refiners (and therefore coin dealers) are happy to buy what is known as three or four nines pure silver, meaning 99.9 or 99.99 silver. Coins in this category include the American Silver Eagle, the Canadian Maple Leaf, and many other sovereign silver coins. Many rounds—coin like objects made by private mints rather than government mints—and silver bars also meet these criteria. Silver jewelry, silverware, and even constitutional or junk silver do not. Refineries are holding off on refining these products because the high cost of nitric acid makes them less profitable.
Why is nitric acid expensive? One, because it is derived from natural gas, and the war is driving up the price; and two, because it is a precursor to gunpowder and other explosives. Demand from that market is so high that suppliers are directing nitric acid supplies to the munitions industry and for conversion into fertilizer. That means your ammunition is going to get more expensive at the same time your stored silver is sinking in value. Call it the prepper’s price squeeze.
Junk Silver is Still a Good Choice for Preppers
Whether you bought your roll of 90 percent silver quarters for 15, 20, 30, or somewhere above 50 times face value, it will still have value as a trade mechanism after the SHTF. If the U.S. monetary system collapses and the dollar loses its value, a pre-1965 quarter will still be worth more than 25 cents because it contains 0.1808 ounces of silver. (As I write this, a junk silver quarter is still worth $13.30. A $10 roll of quarters contains $532 worth of silver.)
While the lower prices might encourage you to buy the dip, I would only do so if I had plenty of food and other supplies on hand. If I had an extra $2,000 and my options were to buy 18 months’ worth of food, 25 ounces of silver, or less than half an ounce of gold, I’d opt for the food. Now, if I had an “extra” $20,000 burning a hole in my pocket, I’d buy some of each, plus a few thousand rounds of ammo.
There is a segment of the prepperverse that considers ammunition to be a monetary replacement in a post-SHTF world. I agree, but only if trading with friends. When dealing with strangers, I’d rather give them silver than lead that might be headed back my way at high velocity. It’s also easier to carry $500 worth of silver than it is to carry $500 worth of 5.56 rounds or 12 gauge shells.
If you are forced to bug out, you can transport and hide $50,000 worth of gold far easier than you can carry 43 pounds of silver or 100 ammo cans. So diversify if you have the means. Junk silver for everyday purchases, silver coins for bigger purchases, and gold for preserving wealth in an easily transportable form.
