Metals, a Hedge or Investment Depending on Your Views... or a Sucker's Bet?

[Jacob Petersheim]

Gold's spot price is well over $3800/ounce right now. That's quite a bump since I began looking at this, with no substantial pullback during that time. Silver's gone over $47/ounce, though it has been a little more "bouncy" it has increased proportionately even more than gold.

Much of this is driven be the shrinkage in the Dollar, but far-eastern market demand seems to be another factor that might be starting to be the more significant one.

There are sentiments that the Dollar is now beginning to show strength (i.e. stability or reversal of the shrinkage in buying power). This isn't good news for things like Trump's desire to repatriate manufacturing and increase exports. Normally it would also push down precious metals pricing... but if it has shrunken as a factor then all bets are off on metals prices.

How much economic prognostication involves cherry-picking "indicators" isn't clear to me. It sure looks like there isn't much "science" to it though.

It is starting to feel like metals prices are a sort of economic "misery index" though.

 

[Jacob Petersheim]

With metals rising in price, gold is becoming harder to acquire a little at a time. People turned to "fractional gold" like 1/2 ounce, 1/4 ounce, 1/10 ounce, and more recently even 1/20 and 1/25 ounce tiny coins.

Silver, being much cheaper, has long been the choice of "stackers" of modest means. That's part of the popularity of 90% silver "junk silver" a.k.a. Constitutional Silver coins. Buying a couple of silver dollars, quarters, or a roll of dimes represented little more than skipping a few candy bars or beers.

Today though, prices are rising. And the junk silver is starting to disappear, both into hoards and the smelter's melting pot.

So now "fractional silver" is on the rise. Here are some very generic "silver rounds" of 1/10 Trot ounce. So generic that the reverse side is smooth and blank, saving production costs and keeping the premiums low.



That tube of 35 coins goes for $225 retail right now. Buy 35 or more at $210.

From what I'm hearing about the market, a dealer would be more likely to buy them back off you at a better price if you had several intact tubes to sell. That gives them something to place into their display counter trays rather than dumping them into their boxes of random generics for customers to root through.

But I think the idea is to make it easier to "stack" a little silver each paycheck or two... and perhaps for use in barter. Each coin should be worth $6 to $6.50 in trade today. That's a bit more than a silver dome which is only about 1/14 of an ounce of silver.

 

[Mary Stetler]

We got gold dimes long ago because getting change for a kruggerand would probably be difficult in the future. Of course we don't have tons of metal. Just enough to get by in an emergency. I guess some think they could buy whole towns if they had enough. Having had rental property, I'm out! All I want is my little farm.

 

[Jacob Petersheim]

A "nugget" of history about Michigan copper, starting some 9500 years ago.

Was the Old Copper Culture wiped out by invading immigrants from Asia?

 

[Jacob Petersheim]

​

Gold preserves savings by acting as a store of value and an inflation hedge, maintaining purchasing power when currencies decline and economic uncertainty rises. Its historical ability to hold its value, combined with its limited supply and intrinsic desirability, makes it a safe-haven asset that protects wealth from erosion during periods of high inflation, economic instability, or currency devaluation.​

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The bottom line​

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Adding gold bars and coins to your retirement portfolio can be a smart way to diversify your assets, mitigate risk and safeguard your financial future. That said, as with any investment, you should consult with a financial advisor before making any decisions to ensure that they align with your goals and risk tolerance.​

The suggestion is to save in gold, not to get rich from it. But maintain liquidity in cash! Gold is quite liquid as an asset, but it does still require conversion before it can be spent.

Both your daily/monthly expenses need to be covered by cash. Your emergency fund needs to be in cash. And some savings beyond that should be kept in cash.

Silver has a potential secondary role, not so much as part of your savings but in troubled times it might serve as a "barter currency" under weird scenarios such as hyperinflation or banks locking up accounts. But keep cash on hand as well!

Remember "It's A Wonderful Life" when the bank runs began?

 

[Jacob Petersheim]

In January 2023 the BIS (Bank of International Settlements) listed gold as a high quality liquid tier 1 asset. That left only one central bank short on gold: the Fed in the US.

China has been accumulating gold for years now and those efforts have ramped up. There is a suspicion of a coming gold-backed reserve currency coming out of China for BRICS.

Canada seems to have actually sold off almost all of its gold. I have no idea what that's all about. Meanwhile flows of gold into the US have ramped up to notable levels instead. Nobody seems to know where it is going within the US. Retail buyers still don't even nudge the needle, and gold ownership by individuals is still close to 0.05% of people, or 1 in 200.

People still disparage gold as a "pretty but basically useless rock" but that doesn't seem to be a fact at all among the large players of the financial world.

 

[Jacob Petersheim]

"Fractional gold" in under 1 ounce units has become popular with the rise in price. There are lots of options out there, many older foreign coins that saw circulation.

2 Peso Mexican Gold Coin:



Purity 0.900%
Metal Weight 0.0482 Troy Ounce (just under 1/20 ounce) or 5.19 grams.
Diameter 23.0mm

Cost around $190 as I write this.

These coins make me think of "The Three Amigos."

 

[Jacob Petersheim]

Something I'd never heard about until I started looking at bullion is silver milkspotting.

This seems to come from impurities introduced by some mints, and brought out during the annealing process following minting strikes:

Canadian silver coins, particularly pre-2018 Maple Leafs, tend to milkspot due to residues from the minting process—like detergent or borax—being baked into the coin during annealing. This leaves a blemish that can gradually develop into white, cloudy milk spots due to reactions with the silver over time. Heat and humidity can accelerate this process, and the Royal Canadian Mint now uses a proprietary "Mintshield" surface protection technology to prevent these spots.

What you'd normally expect to have is a clean and shiny surface. Instead you can end up with whitish streaks and spots or mottling that often only comes out visibly with time.

This is separate from silver's tarnishing which typically comes from sulfur compounds in a coin's holder or even in the air from sources such as Diesel or kerosene exhaust, and to a smaller extent oxidation. This is so common and sometimes can be colorful in appearance that coin collectors often refer to it as "toning." It can even enhance the collector value of some silver coinage when it falls within certain conventions of beauty.

 

[Jacob Petersheim]

Coin silver is 90% silver and 10% copper, possibly with some copper supplemented by other metals. It was used for US silver coins and flatware, and in electrical relay contacts and such. Canadian coins used 80% silver. The alloy is more durable than pure silver, resisting both abrasive wear and deformation through impacts and pressure.

Sterling silver is 92.5% silver meant to serve much the same purpose. While not as durable as coin silver alloys, it has a luster and general appearance more like pure silver. It was used in some coinage, fine flatware, and in jewelry.

Both alloy-fractions resist tarnish better than pure silver as well.

At one time, silver was called "the poor man's gold." The rich actually used gold flatware, often 10 or 12 karat alloys for durability. Gold flatware seems to have all but disappeared long ago though, certainly by the early 20th Century.

 

[Jacob Petersheim]

Washington State is Coming for Your Gold (The Triplex Tax in 2026)

I'm not sure his "buy out of State" workaround is viable. As far as I know you still owe a "use tax" at the same rate.

 

[Don Alaska]

Washington State is Coming for Your Gold (The Triplex Tax in 2026)

I'm not sure his "buy out of State" workaround is viable. As far as I know you still owe a "use tax" at the same rate.

If you bought out of state with cash, you might get away with it, but is you transferred money or used a card of any kind, you would owe tax. Washington so far does have an income tax, but it has taxes on everything else.

 

[Jacob Petersheim]

If you bought out of state with cash, you might get away with it, but is you transferred money or used a card of any kind, you would owe tax. Washington so far does have an income tax, but it has taxes on everything else.

I suspect you might get caught down the road when you try to sell. Dealers report many transactions to the IRS, and a State collecting taxes on metals sales would probably claw back those records as well. So I suppose it depends on how aggressive the process becomes.

 

[Marie Mallory]

"Fractional gold" in under 1 ounce units has become popular with the rise in price. There are lots of options out there, many older foreign coins that saw circulation.

2 Peso Mexican Gold Coin:

View attachment 1183View attachment 1184

Purity 0.900%
Metal Weight 0.0482 Troy Ounce (just under 1/20 ounce) or 5.19 grams.
Diameter 23.0mm

Cost around $190 as I write this.

These coins make me think of "The Three Amigos."

Jacobs I couldn't even save silver. I just imagine what the sellers would say if I called them about gold coins. circumference and thickness may not be a question they would approve of.
Then when I told them how much I wanted, lol.

 

[Jacob Petersheim]

Jacobs I couldn't even save silver. I just imagine what the sellers would say if I called them about gold coins. circumference and thickness may not be a question they would approve of.
Then when I told them how much I wanted, lol.

I think it depends on the shop, if you are buying from one.

Some are used to people coming in to buy a couple of silver dimes or quarters at a time. Small sales are not unheard of.

Dealers have books on each coin with specifications. If they handle coin collecting then they have even more books.

There are also phone apps where you can look up the more common coins. They give the weight, thickness, diameter, etc. Some are even designed to listen to the "ping" when you strike a coin and match the sound to a "signature" in the database for verification. They can usually display a circle to lay the coin on to measure it, and a rectangle for thickness.

Dealers also have pricey machines to test the metal itself electrically. They also have dropper-bottles of acids used for some testing.

There are also magnetic tests. A magnet should not stick to any of them. In the case of silver and copper, a small magnet will slowly slide down the coin due to the electrical properties of those metals. One guy even sells a little "magnetic slide" to slide the coins down. if they stick - bad coin. If they slide fast - bad coin.

I don't know if that also works for gold but I think it may.

 

[Marie Mallory]

I think it depends on the shop, if you are buying from one.

Some are used to people coming in to buy a couple of silver dimes or quarters at a time. Small sales are not unheard of.

Dealers have books on each coin with specifications. If they handle coin collecting then they have even more books.

There are also phone apps where you can look up the more common coins. They give the weight, thickness, diameter, etc. Some are even designed to listen to the "ping" when you strike a coin and match the sound to a "signature" in the database for verification. They can usually display a circle to lay the coin on to measure it, and a rectangle for thickness.

Dealers also have pricey machines to test the metal itself electrically. They also have dropper-bottles of acids used for some testing.

There are also magnetic tests. A magnet should not stick to any of them. In the case of silver and copper, a small magnet will slowly slide down the coin due to the electrical properties of those metals. One guy even sells a little "magnetic slide" to slide the coins down. if they stick - bad coin. If they slide fast - bad coin.

I don't know if that also works for gold but I think it may.

I was joking with you, I'm not buying any gold.

 

[Don Alaska]

I suspect you might get caught down the road when you try to sell. Dealers report many transactions to the IRS, and a State collecting taxes on metals sales would probably claw back those records as well. So I suppose it depends on how aggressive the process becomes.

Maybe if you sold a large quantity to a dealer, but I think being dispensed as gifts or sales in small quantities over time would be impossible to track, especially if nothing went into a bank account of any kind.

 

[Jacob Petersheim]

Maybe if you sold a large quantity to a dealer, but I think being dispensed as gifts or sales in small quantities over time would be impossible to track, especially if nothing went into a bank account of any kind.

Well...

Bullion dealers report certain buyback (sale) transactions to the IRS, but not all of them. Reporting is required for sales of certain types of precious metals (like specific large bullion bars or 25+ of certain gold coins) or when a customer pays with cash in excess of $10,000. Dealers use IRS Form 1099-B to report certain sales and IRS Form 8300 for large cash payments, with the goal of preventing money laundering and tracking taxable income.

Local dealers may or may not file paperwork except where required. However online dealers operating at scale might over-report as part of their automated systems.

One might think local guys might be pretty lax about reporting. As far as I can tell even in places like New Hampshire they talk a good game about "freedom" but they also admit they deal with police, FBI, and Secret Service interviews from time to time. They deal with everything from stolen goods to counterfeiting.

For dribs and drabs crossing the State line for some fireworks and junk silver may be viable. But right now 3 gold coins can put you over that $10K threshold.

 

[Jacob Petersheim]

I was joking with you, I'm not buying any gold.

Yeah. Yeah. That's the ticket!

 

[Jacob Petersheim]

There are a number of protective devices for bullion coins.

They come from the mint in "tubes" that have a plug or cap on one end, and depending on the coin may hold 10, 16, 20, 25 etc. coins each. Sort of like a durable version of the "roll" we're used to for currency coins from the bank.

There are also cheap protectors called coin pouches or "flips." These are a thin sheet of polypropylene folded over and ultrasonically welded into a pouch or two inward-facing-slot pouches. These are cheap enough that a dealer will often put your small purchases of fine or delicate collectible coins into flips. Buy more than half a tube and you may get a 3rd party or mint tube with a sponge spacer inside to prevent rattling.



This two-coin flip folds over in the middle to help keep the coin or two coins from falling out. Single-flips typically have a fold-over flap instead of the second pouch.

 

[Marie Mallory]

Yeah. Yeah. That's the ticket!

Be nice Jacob, at my age panning for gold isn't logical. Anyway who would I leave it to, it kids would just buy a huge money pit to slave for. Just kidding they are ok. I just wish they would get a little place in the country and raise goats, horses, donks ,one already does raise hens and has a garden so thats good.
If I struck gold which of course first I'd have to dig or pan, I'd buy a huge ranch -farm for them to go to.