Gold as Currency

Gold as Currency

Gold as Currency

2013-07-17 11.42.08-1

Gold, with its wide disbursement geologically, has been valuable to humans of nearly all societies since its discovery; its no surprise, then, that its transition to monetary value has been in effect since 700 B.C., when Lydian merchants first used gold as a trading mechanism.  Many countries, including the US, have used gold to mirror the currency equivalents for those nations called gold standards, until many were dismantled during the financial crisis invoked by World War I.

Gold holds intrinsic value for three main reasons: it is easily moldable, inherently rare, and can be objectively valued based on weight and purity. Unlike Federal Reserve Notes (paper money), gold cannot be printed off or artificially reproduced. This lack of artificial production and scarcity lends to its further increasing value, while paper money’s value dilutes every time more is printed.

So while 2013 law reflects that Federal Reserve Notes, and nothing else, constitutes money, it’s not hard to argue that when the economy does collapse, gold is the currency we will fall back on. This is not to be confused with investing in gold; despite it’s current value of $1,200.00 per ounce, an increase of over 400% since 1999, it’s the act of using gold as a trading mechanism that makes the most sense.

It’s dramatic increase in worth further supports the reasoning that gold will eventually be the manner in which trade occurs if a collapse does happen, because gold investing and trading becomes most active when economic worry is present –– just as it is now.

The current economic relationship with gold further illustrates its staying power, as the topic of gold currently dominates widespread news organizations such as The Wall Street Journal.  Gold is currently experiencing what economists are labeling as a “wash-out,” in that the price has dropped 12% in the past month, with a 23% decline in the last quarter –– its worst performance in documented history.

For those interested in buying gold, however, this is a possible boon. As a commodity, it has decreased to the point where it’s favorable to buy but no longer appropriate to bet on any further declines.

Physical gold, too, provides the safest management of your money in relation to the banks; that is, gold and silver exchange-traded funds are not the same as coins and bouillons, and the likelihood of a gold confiscation scheme occurring like the Gold Act of 1933, is possible as the US economy remains unstable.  However, because the seize of 1933 was during the age in which the US treasury operated under the Gold Standard, the seize is not likely to happen again today under the same methods.

Gold purchases can be made either locally or online, depending on the preference of the purchaser. Both choices offer different benefits such as types of products available, pricing, delivery time, and taxation. Ultimately, the best decision depends on the needs of the consumer, and will vary person to person.

Deciding on what form of gold to purchase is one of the most important aspects of gold. Like mentioned previously, buying physical gold (as opposed to investing in exchange-traded products or certificates) is what we are advocating. Typically, gold is broken down into a physical product (bars or coins) and a theoretical product (certificates, accounts, derivatives, exchange-trades).  Any purchase where the gold will not be physically available to use as currency during an economic collapse is fruitless.

Purchasing bars is perhaps the most traditional way to buy gold. Bars typically have lower premiums than coin purchases, but hold a higher risk of forgery.  Gold bullion bars are sold by the troy ounce and are sold in common sizes of one troy ounce, 10 troy ounces, and 100 troy ounces. Larger sized gold bars are also available. Most gold dealers will sell these bars for a percentage over the spot price of gold. The objective measurement of bars is more convoluted than coins in that they cannot be weighed and measured against typical values. Additionally, the size of the bar can lead to the interior being filled with another type of metal, such as tungsten, which will be unknown unless it is assayed. To assay a bar of gold is to essentially test the bar in a lab to determine the validity of a bar; many higher-quality establishments will not purchase the gold back without first assaying it.

Coins offer many of the same benefits of a bouillon bar in that they are tangible objects that can be traded after economic collapse. These coins are priced based on their weight, and hold a small premium depending on supply and demand. Because of the nature of coins, they also run the risk of being counterfeit, in which they would typically be made of gold-plated lead.

Much like coins, there are also rounds, which are gold formulated in a round shape. These, unlike coins, do not hold traditional currency value, or collectible value in their current state. Rounds are beneficial for those that are looking to have the benefits of coins without the higher price created through being a US Federal currency.

Online undoubtedly offers a larger selection of products to purchase gold for future trade use. The biggest reason for this is the limited space and client base of a brick-and-mortar store as opposed to an online retailer; excessive inventory within a physical retail store drives costs up, so the logical thing for a retailer buyer would be to purchase what the general public visiting his or her store are interested in. In short, the goods available in a brick-and-mortar location are dictated by the purchasing patterns surrounding their shop.

Online stores operate on another business model in that they are able to access a multitude of consumers; because many online retailers purchase their goods directly from mints as third party vendors, they also possess a wider inventory selection.

When purchasing gold, it is important to take into consideration the trustworthiness of the seller, where you plan to store the gold, and how you plan to use it. Third-party vendors may or may not have had their gold assayed since purchasing it, which increases the likelihood of it being a counterfeit good.  A trusted resource of is JM Bullion, an online precious metals dealer.

Online generally dominates in this variable as well, simply because they can: online stores, again, have fewer overheads than physical retail stores. They are able to provide less expensive pricing for a wider variety of products because they have fewer expenses in operating their business. Typically, the pricing on gold is dictated on the gold spot price, or the current price gold is currently being sold for. Typically, the price the gold bar or coin is being sold for in retail manner will be above what the re-seller gets from the mint. Typically, the more gold purchased by the buyer during one transaction, the lower the increase of the spot price by the re-seller will be. Pricing also varies depending on whether the gold being purchased is a bar, round, or coin.

Delivery time is the biggest plus a physical retailer can provide over an online retailer; if purchasing gold rounds or coins is something that needs to happen immediately, opt for the physical retailer. Note that depending on the retailer, and whether they purchase gold from the general public, the validity of their gold may not be completely proven.

Taxation is trickier to determine as it typically has more to do with the state you are living in –– and whether they tax the purchase of precious metals –– than anything else. If the state does tax the purchase of precious metals, sometimes an online retailer will be a better option. That being said, tax laws vary, and local laws should be consulted before purchasing online.

If purchased intentionally for the future use of currency and not for investment purposes, the storage of your gold, regardless of its form, is a large factor. By no means should the gold be stored in a safe deposit box or third party storage facility for obvious reasons: if an economic collapse does occur, the likelihood of being able to retrieve said gold from an outside facility is pretty much non-existent. In addition, if you are in need of an immediate retrieval of your valuables, the restrictive schedules of banks (closed on holidays and Sundays) may be a significant inconvenience in the case of an emergency.

There exist a few gold investors who favor secret storage spots, finding a secure place such as, underneath a floorboard or inside a wall, to hide their precious metals. In the case of a poorly thought-out secret spot, despite saving the cost of a safe or a bank fee, the method of secretive storage is an insecure protective measure, considering, not only the possibility of someone finding the storage location, but also the higher chances of damage.

One of the most popular, and ultimately, most efficient methods of storing gold is the use of safes. Through this storage measure, the possibility of damage, a risk for those who place their gold in secret storage locations, is dramatically reduced. Not all safes are ideal for storing precious metals, however, as smaller and unfastened safes are easily lifted and transferrable. In the case of such a safe, make sure to keep them bolted to the ground, disabling its ability to be removed. Ideally, the best safes are UL rated with a UL-15 spec or higher. For example, a Composite Fire-Cladded Safe with a mechanical lock would be a good consideration for those interested in storing their gold in a proper safe. Many safes haven proven to be not as safe as the consumer might think, so it is especially important to research each safe prior to making a purchase.

The diversification of goods, and more importantly, skills will increase the likelihood of survival. Gold can be viewed as a method of trading, but like any solid background, the ability to fend for oneself in entirety is integral to survival. After all, what the gold may not be able to purchase for you, you’ll have to modify yourself. While gold does have purchasing power dating back 3,000 years, it’s not recommended that any logical prepper choose to stock-pile with only gold and guns. Relying solely on your gold investments is disregarding your own limited supply and the possibility of an extreme economic collapse, wherein monetary value becomes futile and obsolete. Gold can be viewed as a method of trading, but like any solid background, the ability to fend for oneself in entirety is integral to survival. When paired with the diversification of goods, and more importantly, skills, the likelihood of survival increases significantly.

With a clear understanding of the value of gold, its acquisition, and its role in the economy, an investment in this timeless metal is more of an investment in financial security. Gold’s ever increasing value is a reassuring option in a fragile economic state. It is not, however, an investment to be made by a rash decision. Understanding your own financial situation is the first step in considering purchasing gold properties. From there, thorough exploration of gold buying options, along with a concise plan on how to protect what you will acquire (whether or not you have the resources to properly store gold), is the best plan of action. Ultimately, gold is its own pay off, and will prove itself a smart investment in light of an economic collapse.

Note: This has been a guest post by Amber Materna who is an editor living in Southern California. A graduate of the University of California, Los Angeles, Materna has worked in both nationally- and regionally-circulated publishing companies, Modern Luxury and Peninsula Publishing. When she has the opportunity to write, her largest interest remains in the conscious bettering of oneself, often found (but never limited to) the subjects of outdoor living, health and fitness. Find her on Google+:

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These are exactly the reasons that me and many of my SOF bretheren wore what we called E&E chains. Basically they are 22k gold necklaces formed in blocks so in an emergency or E&E situation, we could take off the chain, pull out a knife and whack off a couple of links to pay a farmer or good samritan for a bowl of rice to eat or a barn floor on which to sleep. My partner JJ (sound familiar?) on the AT team and I also bought 1 – 5 gram size gold bars to hide in our belts for the same reason.

Buying gold online may give you a chance to spare yourself from tax entailed by buying such a precious metal. However, the high incidence of forgery of this metal which is less likely to be detected when doing the transaction over the internet should make any smart buyer to opt for honest state taxes than getting ripped off.

Very important to have PM’s on hand. I wouldn’t stop there though. Copper pennies (1982 and earlier) and nickels are also a good thing to have. Why? Because each one is worth more than its face value.

I’m not sure if you could spend nickels in a poo hit the fan scenario, but it can’t hurt to hold on to some.

As far as the PM’s go, now isn’t a good time to buy for investing. You can invest in the physical stuff. I would never buy paper or electronic gold. There isn’t enough gold available if everyone decided to cash out at the same time. Junk. But, I agree, it is better to have it for the poo/fan scenario.

Buy the real stuff. Whatever you can get your hands on. Stay away from large amounts of platinum group metals. Over priced and not valued as a currency like gold and silver are.

Of course, when the poo hits the fan, the best thing to have on hand will be lead. Lots and lots of lead. And brass, of course, filled with black powdery stuff to make the lead fly faster than the speed of sound–directed at anyone trying to take your gold.



Great points! Thanks man. jj

I think silver would be a better PM to store for average day to day post collapse barter. Especially in smaller amounts like Silver Eagles and 90% junk (pre 1964 dimes and quarters). Gold is to valuable and hard to make change with for daily spending. Today a 1964 dime is worth $1.70 in silver bullion. Post economic collapse it would be worth far more. Gold would be good to trade for very large items like a tractor (provided it is still functioning) or a medical procedure from a competent doctor.

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Gold as Currency

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