Foundational Precious Metals Post 2 of 2

Fundamentally we have 2 types of bullion coins available today:

Legal Tender: These coins are or were issued by a nation. Some are old and come from a period (because despite what some want to say experiments with Fiat currency are not an invention of the last hundred years) where they were issued as currency. Of these the rare and in especially good condition stuff have collectible or numismatic value and as such we will ignore them. Other coins like Pre ’64 90% US silver, British Sovereigns, French and Swiss Franks, etc were made in such quantities that average coins in average condition carry a very small premium over spot. These can also be a pretty cool collecting opportunity, not necessarily for added value but just coolness. Think of the history a British Sovereign minted in 1895 must have seen? In that regard they are a bit neater than say a comparably sized 1/4 ounce Eagle or Maple Leaf. Other of these coins are currently minted by governments and given a nominal currency value. I say a nominal value because an American Gold Eagle which is worth $1,200 has a currency value of $50.

Pro- These tend to be more widely recognizable and as such you might well have an easier time getting people to accept them. This is of course implying you buy more common stuff, I do not know what a Swaziland Uberwaffer from 1910 looks like.

Con- Tend to carry more of a premium than private mint products though there are some exceptions.

Private Mint products: These vary widely. Some major brands such as Credit Swiss, Englehard, Johnson Matthey are widely known to the same degree as legal tender products. There are also numerous different mints and mint products. You can see all sorts of different stuff, want an ounce of silver shaped like a star, coke bottle or bullet? Somebody makes them.

Pro- Tend to be cheapest way to get a given amount of bullion.

Con- The big name recognizable ones carry premiums not too far from government issued stuff. The less common ones may have issues with recognition. Also there are a lot of fakes out there. 

Gold products

I would stick to either government minted or very common private mints.

Sizes. For sizes fractional (under 1 ounce) coins are handy but they carry higher premiums per ounce than 1 oz coins. Maybe a guy gets a couple (or a few if on a higher budget) ounces of 1/10th to 1/4 oz coins then transitions to just buying 1 ounce coins.

Silver products

90% silver is a really good deal. To the best of my knowledge nobody has faked it and the premiums are quite low if you buy smart or in any quantity.

Government issued or common mint rounds/ bars are fine. I like 90% for divisibility but if you choose Silver Eagles I would not think it is a terrible idea.

From a survivalist/ barter perspective I would avoid 10 and 100 ounce bars. The reason is twofold. First their lack of divisibility makes them a bad choice (for a single item of that value I would go with a fractional gold coin) for this concept of use. The benefit they have is dropping (especially the 100 oz bars) premiums as low as possible which makes sense for an investor. The second issue that universally applies is that there are a bunch of fake 100 oz bars of silver (and gold though I presume if you are buying 100 oz gold bars you aren’t getting advice from me:) floating around. I would not buy a 100 oz bar in a private sale, period.

How much of each for some specific purposes is worth thinking about

A speculator is going to buy and then sell whatever they think has the most upside. A speculator would probably stick with the largest (fractional) gold he could afford or ideally stick with one ounce rounds. For silver a speculator would go with 100 ounce bars if he can buy them confidently and can afford to buy/ sell in those increments. [Bear in mind most people would say it is prudent to take a long term approach and buy/ sell incrementally. What I am getting at is that from this perspective you would want to have several or a dozen units of silver/ gold to best play the market. So it would not be about affording one ounce of gold or one 100 ounce silver bar but several of each to play at that level. If you have less cash then stick with smaller quantities IE fractional gold and 90%/ 1 ounce/ 10 ounce silver.]

A tangible investor would be well advised to go 50/50 between the two. Mr Tangible could probably stick with his buddy Mr Speculator and get the largest (fractional) gold he could afford or ideally stick with one ounce rounds. For silver a speculator would go with 100 ounce bars if he can buy them confidently and can afford those increments with enough frequency to dollar cost average.

A hedge against inflation. Under say $750-1k I would just buy silver. I would buy 90% pre ’64 coins (the only silver I have bought in years)  due to its low cost, divisibility and recognition but if you wanted to get either legal tender (Eagles, Maples, etc) or common private mint one ounce rounds I would not criticize. Stay away from no name private mints and 10 or 100 ounce bars. For between 1kish and say 10k I would split 50/50 between silver and gold. US 90% silver or common one ounce rounds for the silver. The first ounce of gold would be 1/10th ounce or similar size coins, the next couple ounces in 1/4 ounce rounds/ Sovereigns/ Francs or a similar size and the remainder would be one ounce rounds.  For funds beyond 10k I would probably go 70% gold and 30% silver. The exception would be if you are really worried about portability at which point a person could go 90-100% gold above 10k. Same as before with more US 90% silver or common one ounce rounds for the silver and more one ounce gold rounds.

Mad Max. Under say 2k I would just buy silver either 90% or common one ounce rounds. For between 2kish and say 10k I would split 50/50 between silver and gold. US 90% silver or common one ounce rounds for the silver. The first ounce of gold would be 1/10th ounce or similar size coins, the next couple ounces in 1/4 ounce rounds/ Sovereigns/ Francs or a similar size and the remainder would be one ounce rounds. For funds beyond 10k to say 50k I would probably go 2/3 gold and 1/3 silver. Same as the 2-10k purchase plus more 90%/ 1 ounce silver rounds and 1 ounce gold rounds. If you are really worried about having enough silver for small transactions then go 50/50 to 50k. On the other hand if you are really worried about portability at which point a person could go 70-80% gold above 10k.