Is Gold & Silver Still Worth Their Price?

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SportZ114
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Is Gold & Silver Still Worth Their Price?

I understand the value of Gold & Silver as a hedge against the dollar/inflation.  However, I'm starting to question whether Gold & Silver are really still worth their price.  As of today, I have to save up roughly $1700 for a 1-ounce gold coin, that's only 1 coin! 

I'm wondering if I should be putting my money into another commodity that has not skyrocketed as much as Gold & Silver have.  For instance, Gold has doubled in the last 2 years (100% increase), while a gun 2 years ago is probably only 10% more today.  It appears that all prices have been increasing as of late (of course due to inflation) but that Gold & Silver are leading the way, and perhaps are getting ahead of themselves.  Of course this would be good if you bought Gold & Silver several years ago but is not so good if you got in the game late and are still trying to accumulate (as I am).

The last time the dollar could be directly exchanged for gold was in 1971, when $35 could get you an ounce of gold.  (The Bretton-Woods System between 1944 and 1971).  Does anyone know what a gun cost in 1971?  For the sake of an example lets say a new pistol cost the same price ($35).  Now lets say I go buy a new pistol today for $500.  That's a 1,400% increase.  Compared to buying an ounce of gold today ($1700) and that's a 4,800% increase.  Today, that 1-ounce gold coin is more valuable than 3 pistols.  Again, it would have been smart to buy Gold & Silver several years ago, but is it still worth it as we near the end of this system?

Since it seems many items still have not been fully adjusted for inflation (at least not like Gold & Silver), I'm thinking it might be smarter to put my investment money into weapons or land or anything else that will hold value, and I can accumulate more of.  When the time comes, and SHTF, I see 2 outcomes.  First, the Gov. can get smart and create a new monetary system with a new currency, (which at this point does not seem likely), or Second, hyperinflation kicks in, then deflation.  Either way money will be re-valued and when that time comes, you'll have the opportunity to exchange your 1-ounce gold coin for 35 new 'bankos' (just for an example) or I can exchange my 3 pistols for 105 new 'bankos'. 

Does what I'm saying make sense or am I missing something here?  I understand as long as we have inflation Gold & Silver are a good investment and will only go up, but when the financial system finally crashes, and currency is 're-valued' I'm thinking the late Gold & Silver investors will not get their moneys worth.

As a further example, would you rather own a $100,000 home, or 58 ounces of Gold?  Trying to leave out fiat, what do YOU think is more valuable today, a house or 58 coins?  How about 3 guns or 1 coin?

Edited by admin on 11/08/2014 - 06:06
bern
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I believe that gold and

I believe that gold and silver will continue to outperform all other assets as a store of wealth.  After QE3 is announced and PMs shoot the moon, you will likely be lamenting the good old days when gold and silver were cheap at ~$1660 and ~$41.50 respectively.

YMMV. 

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Dr Durden
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No offense, but you sound

No offense, but you sound like every person I've ever discussed owning PM's with, esp gold. Same line over and over: "Gold? It's too expensive!" Funny how you'll hear this to the day you die, too. However, there's obviously a reason why.

Your home is a rotting, deteriorating pile of sticks that requires more and more $ and resources (labor) to keep it from falling down. The days of buying one as an investment (unless you pull cashflow off of it if you rent it) are quickly ending. Sad, but true.

Gold doesn't cost you anything. It also has zero counterparty risk. Gold is gold is gold all over the world all through time. Sure it's pegged to fiat, but it's constant in and of itself. Anywhere on the planet, an oz of gold is an oz of gold.

The problem is the nature of your question "is gold or silver worth____" in whichever fiat currency you chose to base it in. What gold is telling the world is not how much it's worth, it's how the currency it's priced in is becoming worthless. Look at gold in any currency in the world and you'll see the truth. 

Your gun can protect your home or your land but it cannot protect your wealth. Even if gold were to move straight sideways from here....1600 POSX's for 10 years....you will still come out ahead because it will take more and more fiat to get the same amount, it's a mathematical certainty. 

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FalseParadigm
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Gold too expensive?

If gold is too expensive for your taste then buy silver.  It's just as precious as gold and will outperform gold once QE3 is announced.

Consider that back in May, the GSR was 30:1.  Today we're around 40:1.  If we had the same GSR today that we had in May, silver would be trading around $55.  $41 silver is still a BARGAIN considering where gold is.

Also remember that historically there is a 1:16 ratio between gold and silver.  Silver definitely has a long way to go.

Finally when you adjust gold and silver for TRUE inflation you get prices way higher than we currently have.  Silver adjusted for inflation SHOULD be trading well over $150 per ounce.

Remember that we're dealing with an essentially worthless fiat currency.  Valuing gold and silver in dollars is actually pointless.  Instead of looking at the current trading price and thinking "Man it costs $1660 for gold?" think to yourself, "Today's exchange rate of worthless FRNs for gold (real money) is 1660:1" or "41:1 for silver."  Buying the dips just maximizes the amount of real money you can acquire with your fiat.

I always remind Americans this as well.  Gold and silver are actually a lot more valuable for Americans than the rest of the world.  Why?  Because we own the world reserve currency.  WHEN the rest of the world abandons our currency PMs will be much more valuable to Americans than say, the Chinese, simply because at that point NO ONE will want to accept dollars as a form of payment, not even Americans and American companies.

If you have savings sitting in the bank, exchange those dollars for gold and silver immediately.  Use any disposable income you have and buy gold and silver regardless of where the price is. 

Like others have already said, in a few years $1660 gold and $41 silver will look like bargain prices.  You'll look back on today's prices the same way we look back at gold trading around $300 and silver around $5.

SportZ114
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"in a few years"....?

I think you guys are missing my point.  Believe me, I'm on your side and over the last 4 months I've spent every cent of disposable income on Gold & Silver.  I'm late to the game sure, but I'm young and I've been stacking as hard as I can ever since I realized there's no way out of our current mess.  And I'm not comparing Gold & Silver to fiat money, I'm trying to compare it to other commodities.  What I'm trying to consider is what the 're-value' will be after the current monetary system blows up.

First of all, can we all agree that our current monetary system WILL END and that it's getting ever closer?  My personal opinion is 2013 at the latest.  You guys both mentioned that 'in a few years' I'll look back and think Gold & Silver were a bargain.  But I don't think we'll make it 'a few years'.

For the sake of my argument, let's say that tomorrow they come out with a new monetary system that is once again backed by Gold & Silver...  EVERYTHING will have to be revalued against the new currency.   Gold & Silver will of course hold value, but so will all commodities, some of which are a better bargain today than Gold & Silver.  I'm trying to look ahead, because I believe it's inevitable that this system will end.  I understand that UNTIL the system ends, Gold & Silver are the best bet, and I'm right there stacking with you.   But what about when it ends?

Let me re-hash the same example I used earlier.  40 years ago 1 ounce of gold was equal in price to 1 gun.  1Gun=1ozGold.  When the re-valuation comes don't you think things will re-value back to similar historical ratios?  Leaving fiat aside, you may say that once again, 1ozGold will buy you 1Gun.  But at today's prices, I can buy 4 Guns for the price of 1ozGold.  Therefore, when re-valuation comes, I'll be able to exchange my 4 guns for 4 ounces rather than the 1 ounce I would have had.

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Gold vs. Guns

PM's have far more liquidity than guns. PM's can be transported and transferred between parties easier than guns (on a current dollar for dollar basis). PM's are easier to store. 

If you had to get out of dodge real fast in a worse case scenario its a lot easier to throw 20 ounces of gold in a backpack than it is to carry 80 guns (using your ratios above).

If you buy 80 guns you might make some lists you don't want to be on, 20 oz. of gold not so much.

I also believe if we see government tightening of controls because of social unrest guns will be clamped down before gold.

Guns still might provide a better ROI in your scenario but might not be worth the possible downsides.

Who knows though, you may be on to something!

Pax Argentum
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If you are concerned about

If you are concerned about the S hitting the F, then your equation of comparable values should first consider the value of a gallon of clean water, a 2lb canned ham or a working flashlight before you consider gold and silver.

To be sure, judiciously chosen firearms will hold their value and may increase in value dramatically if some of the extreme doom predictions come to pass but they are primarily tools and should be treated as such.

Once you have your food, water, shelter and security squared away, then put your extra wealth into physical PMs.
Gold for wealth preservation and silver for day to day transactions. Gold will be a lousy way to buy bread, bullets or band-aids.

Pax

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SportZ114 wrote:Let me

SportZ114 wrote:
Let me re-hash the same example I used earlier.  40 years ago 1 ounce of gold was equal in price to 1 gun.  1Gun=1ozGold.  When the re-valuation comes don't you think things will re-value back to similar historical ratios?  Leaving fiat aside, you may say that once again, 1ozGold will buy you 1Gun.  But at today's prices, I can buy 4 Guns for the price of 1ozGold.  Therefore, when re-valuation comes, I'll be able to exchange my 4 guns for 4 ounces rather than the 1 ounce I would have had.

I get it.

I think the core of this discussion revolves around the working definitions of wealth and value. Until they're pinned down in a working context per the individual, we'll just go around in circles. I don't own a gun because I don't value one at the moment. That could change, of course. If you've managed to convince yourself our world will be turned upside down into a post apocalyptic disaster in two years and you only have so much time and money, gold should be the last thing on your mind. Personally I'm more concerned with my financial security than my personal security, so my fiat is going to gold. 

Good discussion. I like to hear where everyone's at with these important decisions. We'll all find our own way somehow; there shouldn't be a code or a blueprint because the future is unknown. 

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I understand how you feel

I understand how you feel Sport, I used to feel the same way you do.  When you become aware of the impending economic mess, you think it will end very soon.  I thought in 2007 we wouldn't make it to 2009, yet here we are.  Further down the hole for sure, but here we are none the less.  This thing has been going on for decades, there are many wild cards played to manipulate the game and prolong the pain.  I used to think that one day, there would be a sudden event, and life would be over.  Now I understand this thing is a marathon, we need to pace ourselves.  I am young too, i'm 30.  It sucks for sure to be this young and not able to plan for the future, knowing how uncertain it will be.  The others are right, if you don't have (in my opinion) 1 year food and water stored up, prioritize that first.  When you think you are ready, start buying silver.  My biggest fear right now is that we will see another huge downturn, and I don't think my job will sustain it.  So I am taking precautions in this area, which means diversifying my skills.  This is a long and winding road, I am just trying to make it all the way to the end.

SportZ114
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Gold vs. Other

@Ben - good points about the liquidity and transport capability of G & S over guns.  However you used an example of 20 ounces of Gold (should I assume this is how much you have? ;) don't worry I won't tell anyone) or 80 guns, which I find a bit unrealistic.  First off I only have about $7000 of gold and silver right now ('or about 14 guns').  Second, I wouldn't buy only guns or a ton of them - I was using that as an example to help others understand my point of r.o.i..  In reality I would buy a couple high-quality guns, a nice solar power generator, or if I had enough money maybe land.  I'm 26 and with only a few thousand expendable dollars am trying to be wise as to where and how I use it. 

@Pax - all good points.  I bought a home in '08 (with a mortgage of course), I do have some food and water stocked up, and I own a 9mm home-defense pistol, but now I need to decide where to keep putting my expendable money.  G & S is so 'expensive' right now that I feel I'm better off buying a shotgun, maybe an MP15, and a .45, along with that solar power generator that I mentioned.  If shit does hit the fan, they would be nice to have anyway - not to mention that, at that point, I would expect to receive a lot more than 1 gold coin in trade for unlimited 1800 watts of free electricity - as they're currently equivalent in dollars.

@Durden - you stack G & S and you don't have a defense weapon?  Hmm, you're not far from me either.  When SHTF I will be showing up fully armed.  J/K - get a gun!  How can you have financial security without personal security?

@JRob - I understand what you mean.  I actually thought that the system should have ended by now.  It hasn't and so I'm taking the opportunity to further prepare, but realistically it's inevitable, and I honestly believe that it will be dramatically changed by 2012, and if it's not, things will be ugly.

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I really like the question

I really like the question and the conversation. A lot of great points.

In the end we're talking about priorities, No?

Questioning the value of something is rarely a bad thing. A survey of Americans would show that a vast majority of people would never see the "value" in an ASE at say $50. Of course they didn't see it at $10 either and they sure won't understand it at $100.

The {great} reasons for owning physical metal are all out there and I don't have anything to add to the list. It's crazy to think about buying a roll of ASE's if your car which you depend on to get to work needs a waterpump and a radiator and you can't afford to because of your Silver fetish. lol

Are there other/better, items/asset classes which deserve attention in one's own personal portfolio?  Surely there are and we all are constantly trying to figure it out.

I would point out by the time you have you've acquired your first 100 guns {for resale of courselaugh} a Monster Box or two of ASE's is going to be looking pretty sweet too.

FalseParadigm
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SportZ114 wrote:First of

SportZ114 wrote:

First of all, can we all agree that our current monetary system WILL END and that it's getting ever closer?  My personal opinion is 2013 at the latest.  You guys both mentioned that 'in a few years' I'll look back and think Gold & Silver were a bargain.  But I don't think we'll make it 'a few years'.

2013 seems realistic to me.  Once QE3 is announced I give the US 12-18 months until China is forced to abandon the US dollar.  Once China goes the rest of the world will follow.

SportZ114 wrote:
But what about when it ends?

Truthfully when the Ponzi scheme DOES end I think the average person will be in a fight for survival.  These precautions are important but it's not like those that own physical are going to be in way better position than everyone else.  I keep telling people that when the US dollar is dumped that life in the US is going to become extremely difficult.  If no country is willing to accept dollars that means that we will be unable to import any goods.  67% of consumer goods are imported; a dollar collapse will make 300 million Americans compete for 33% of the goods we consume today.  Gasoline supplies will dry up within a matter of days which will make hyperinflation even worse domestically. 

I continue to tell people that each dollar that gold and silver go up is another minute off the countdown to destruction. 

The biggest question I think you have to ask yourself is whether or not you're actually prepared to resist the evil that will emerge out of the chaos. 

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@SportZ114 Gotcha. My opinion

@SportZ114

Gotcha. My opinion is if you are preparing for SHTF overdo the preps before "investing" in items for trade if you have a limited budget. Reason being is the lower you can lay the better off you will be. If things are really bad you don't want to be standing in food lines or out bartering for what you need. Avoiding contact with strangers should be a priority. Hopefully you have friends and family that are prepping too and you have a plan in place. Strength in numbers, don't be an easy mark. Criminals prey on the weak not the strong.

Who knows how bad things will get when the wheels come off the bus but its better to have too much insurance than not enough.

GL to you.

Dr Durden
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SportZ114 wrote:@Durden - you

SportZ114 wrote:
@Durden - you stack G & S and you don't have a defense weapon?  Hmm, you're not far from me either.  When SHTF I will be showing up fully armed.  J/K - get a gun!  How can you have financial security without personal security?

A gun is the only means of personal security? Furthermore, you're making the assumption that IF SHTF gangs of G&S mobs will be roaming the streets in mass terror. Get real, homie. I have many friends with more guns than Texas and could have one in my hand in 3 min if needed; gold on the otherhand...ain't so easy to come by. 

Honestly people, take step back...a deep breath and get rational about this shit. If you think in fear, you'll act in fear and fear will rule you. Have some hope and faith, maybe? Naaah forget that, it's all over....lol.....

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SportZ114
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@Durden - It's not the only

@Durden - It's not the only means of personal security, but it sure makes me more comfortable.  And I'm not talking about G&S gangs, WHEN SHTF, many many ordinary people are going to be struggling - and I bet a lot of them would be willing to steal in order to support their family.  If you can have a gun in your hand in 3 minutes then that's something, however your friend will probably expect a gold coin in exchange, where as you can buy 4 of your own guns right now for that same gold coin - which was the entire point of my post. 

And there's no fear here bro.  I just believe in the saying, "Prepare for the worst and hope for the best".   I'm trying to rationally figure out the best way to prepare for the inevitable. 

You guys have all helped me come to a conclusion though.  That UNTIL the system crashes, G&S are the best bet as far as maintaining value/spending power.  However, at their peak before the crash, I think it would be very wise to take advantage of their high value and hedge some of those metals into other valuable commodities such as weapons and solar-power generators, etc., which could be very useful, will also hold their value, and are currently bargains in relation to G&S.  But, since we can't know exactly when the peak and crash are going to occur, I'm going to start spreading my investments now.  And then when I feel that a new currency (read: currency re-valuation) is on the horizon, maybe I'll sell a couple of my coins and use the profit to double-down on those other commodities. 

Vic
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A few thoughts:The purpose

A few thoughts:

The purpose is similar for both gold/silver and "other commodities". I believe the idea is that a person could take their wealth (savings), which is manifested in dollars, and convert this wealth into gold/silver. That way, if the dollar suffers devaluation and/or replacement, the gold/silver will preserve the wealth on to the "other side" of this process. The "other commodities" will serve almost the same purpose. You could buy these other commodities and store them thus using them in exactly the same way as the gold/silver would be used (as wealth preservation, with the intent of storing your wealth in non-currency and then reconverting it once the storm has passed). Alternately, you could acquire these "other commodities" for use/sale/trade DURING the "storm". This would potentially cause a different outcome, since you aren't simply storing the items for future liquidation, but are using them as inventory. They may have utility during the "storm", they may be more desirable barter items, and some of them could be simply preserved until afterwards for liquidation.

I see where the value comes, and that is in the flexibility of options.  That's good thinking and I agree, in part.

I do feel the need to point out some other factors. You may have already considered these and just didn't post the details but rather the larger idea. At this point, though, let's deal with some details.

Valuation. You seem to have picked a value of approximately $400 to use as the price of "a gun". I will happily give you $400 each for a Springfield SOCOM 16, a Les Baer custom, a Wilson Combat 1911, and an Arsenal SGL series. I will happily sell to you (for $400 each) a Ruger 10/22, a Maverick 88, a Mosin Nagant 91/30, and a High Point 9mm. The point is, "guns" vary wildly in their dollar prices. It is easy for a random person to know the dollar value of an ounce of gold/silver. It is not so easy for a random person to know the value of any particular firearm. Maybe you were using the $400 figure as an example, or maybe you picture a closet full of gently used Glock 19s at $400 each. Otherwise, you see my point.

Storage. It take a lot more space to store firearms than it does to store an equivalent dollar amount of gold/silver.

Security. Hiding $20,000 worth of gold would be easy. Hiding 50 rifles would be less so.

Maintenance. Gold and silver need no looking after while in storage. You'd generally have to look after most firearms while they are in storage in order to keep rust in check.

Ammo. A rifle without ammo is a club (or at best, a spear). If you are just holding the weapons through to the "other side" to then sell them, this is less of a concern. If you want to possibly make use of them during the crisis or to barter with them, having no ammunition for them is a drawback. Gold/silver are self-contained.

A lot of this depends on your own particular idea of what the future is likely to bring. In my personal guess, it will not be on the order of the picture painted by James Wesley Rawles and similar. It will be much more like that experienced by Fernando "FerFal" Aguirre.

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SportZ114 wrote: @Durden -

SportZ114 wrote:

@Durden - It's not the only means of personal security, but it sure makes me more comfortable.  And I'm not talking about G&S gangs, WHEN SHTF, many many ordinary people are going to be struggling - and I bet a lot of them would be willing to steal in order to support their family.  If you can have a gun in your hand in 3 minutes then that's something, however your friend will probably expect a gold coin in exchange, where as you can buy 4 of your own guns right now for that same gold coin - which was the entire point of my post. 

I totally agree, but will continue to preach a collective "relax" when it comes to guns. Most people that I know that have guns have like 15 of them. So it's NOT ONLY about personal security, it's part delusion, part hobby, part fantasy. Last I checked the most you can use at one time would be two, but what do I know? I will be buying a 12 gauge here by the end of the year as that was my goal at the beginning of the year. I expect never to use it, but no doubt I'm on a different level of comfort IF SHTF. If someone comes looking for my gold (which is a completly irrational thought in and of itself) they'll get lead first.

And I totally back you on your "better safe than sorry" sentiment. I'm there.

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Vic
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Also, I see a flaw here:

Also, I see a flaw here:

"Either way money will be re-valued and when that time comes, you'll have the opportunity to exchange your 1-ounce gold coin for 35 new 'bankos' (just for an example) or I can exchange my 3 pistols for 105 new 'bankos'."

In this example, 1oz gold=35 bankos. Also, 1 pistol=35 bankos. For that to work, before the conversion from dollars to bankos, each pistol would have to be worth the same dollar amount as 1oz gold. There are comparatively few $1,650 pistols out there.

Another way to look at this is:

1oz gold=$1,650=35 bankos. That's roughly a 47:1 conversion ratio from dollars to bankos (1 banko is worth 47 dollars). If we apply the same ratio to a more realistic price of a pistol (let's say $500),  each pistol is worth less than 11 bankos.

SportZ114
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That's not a flaw

That's my point, Vic.  TODAY I can either buy 1 ounce of Gold or 4 Pistols (at roughly $400 a piece).  But historically, 1 gun was much closer in price to 1 ounce of Gold.  If we go back to historical ratios, I can then exchange my 4 Pistols for 4 ounces of Gold (or 140 new 'bankos')

The 1ozGold=35Bankos=1Pistol example would come AFTER re-valuation from dollars to the new currency.

As for the $400 price for a gun, I was using that as an example.  I have 2 friends who recently bought a Glock and a Ruger at $400 and $380 respectively.  My CZ 75b cost $450. 

And again, I'm not talking about buying $20,000 worth of guns.  I currently only have 1 for self-defense but now I'm seeing the value of weapons as an investment (realistically a small investment).  Instead of spending all my investment money (which is not a lot) on 8 ounces of Gold, I'm thinking about buying 6 ounces of Gold, and maybe 6 guns.  This is simplified of course, as I currently own an equal value of Gold to Silver. 

And you can be sure I'll have plenty of ammo.  :)

Vic
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I agree with this in theory.

I agree with this in theory. The hard part is picking the guns that will increase in value over time while still outpacing gold's increase in value over time.

Historical guns, such as Colt Peacemakers would likely outperform gold. Guns with a "militaria" value, such as a Garand would also likely outperform, as would high quality guns that are no longer in production, like the Colt Python.

More "everyday" guns like a standard Glock might not outperform gold. For example, I would not pay as much for a Gen 1 Glock as I would for a Gen3 or Gen4, even if all of them were in mint condition. The risk would be that another model would come out that is superior to whatever you got, making yours less desirable in comparison.

The more historical guns, like the Peacemaker, Garand, and Python, would only increase in value because no new ones will ever be made (knockoffs don't count and wouldn't touch the price of a real one anyway), so that'd be a safe bet.

Another tactic that might work would be to buy the lowboy full of SKS rifles that Desert Fox posted. I remember when a nice SKS was $70 while today a nice one is $350 or more. I'm not sure that outpaces the increase in the nominal value of gold and especially silver over the same time frame, but like you are saying, no one ever went poor making good choices when diversifying.

Choose wisely and I think you'd come out a winner.

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