When I watch the business news on television, I am constantly inundated with commercials imploring me to buy gold. They claim the economy is going to collapse and only precious metals will protect our life savings. The commercials are very effective. People truly are worried about the economy and how to preserve their savings. This week, several friends phoned or emailed me about the best way to buy and store gold. I am not a financial advisor and do not have a crystal ball. All I know is that gold went from a low of $380 per ounce in 2004 to a recent high of over $1,750 per ounce. It is now trading at about $1,600 per ounce. It fluctuated wildly several years ago, causing some people to lose a lot of money. Now, it seems everyone is rushing to buy gold in anticipation of an economic downturn or collapse.
The quest for gold reminds me of my grandfather's stories of the Great Depression of 1929 and the years leading up to it. In the 1920s, there was plenty of money and people invested in stocks with no regard to the underlying real value of the shares. The market boomed as they continued to push stock prices higher. Then stock prices collapsed, causing massive bankruptcies. People literally jumped out of windows as their wealth evaporated! The country entered the worst recession of the 20th century.
Now I see massive amounts of money being invested by retirees in the gold and silver markets and even the commodity markets. People are rushing to invest in the hopes of making significant profits or protecting their wealth. For those who are skeptical of the stock market, and there are many, gold is perceived to be the best investment for wealth preservation. How quickly they forget! In 2006 gold reached a high of over $700 an ounce then dropped to about $550 an ounce a few months later. In 2008, gold hit a high of over $1,000 an ounce only to drop to about $700 an ounce. In 2011, it peaked at about $1,900 per ounce and dropped to $1,600. It is clearly volatile, but appears to have long-term growth potential.
If you are an average person, buying gold does not make sense. The people I talked to this week wanted gold, as they were worried about an economic collapse. If the economy goes down the drain, you can't eat gold. If you sell it, there could be a large tax exposure as the capital gains rate on goal is 28 percent instead of 15 percent for other investments. For the average person, purchasing gold to protect against an economic collapse may not be the best way to prepare for an economic downturn. I believe that a more rational approach is better. If you have a nest egg you want to protect, consult a financial advisor to create a well-balanced investment portfolio instead of a pot of gold. To prepare for a major economic disaster, purchase extra food each week so that you can build your own food stockpile. Stockpiling food is the key to surviving hard times. Canned goods, beans, rice and flour have a long shelf life and can be added to your pantry gradually over time as your budget permits.
Canning fruits and vegetables as they come into season economical and can be fun. My wife and I look forward to canning season every year. I also learned how to bake bread that goes very well with my homemade French Canadian pea soup. Over the winter, we ate a lot of our preserves, so it will soon be time to replenish our cellar with new batches of canned fruit and vegetables. Foodinsurance.com and Costco also offer a good variety of prepackaged food items vacuum packed in cans or freeze-dried in buckets. The Mormons encourage their members to prepare for hardship by stockpiling two years of food for their family. I've never heard the Mormons suggest stockpiling gold!
It is also a good idea to purchase some seeds for long-term storage. Items such as Survival Seed Vault can be purchased from Amazon.com for about $35. Each can provides the seeds to plant a full acre of land. My wife bought several books including The Backyard Homestead, which is available from Amazon.com. This book provides proven methods to grow the food your family needs very efficiently on a small plot of land.
While you're shopping for the book at Amazon.com you can pick up some potable water tablets and water filters that will enable you to convert stream or river water into drinking water. Don't forget your medications. In addition to food and water, you will need to stockpile a six-month supply of medications for your family members. You should also have a good first aid kit, a few medical books and some survival guides.
If the economic system does collapse, you could end up bartering for the items your family needs. What will be the best items for bartering? One does not want to trade their food supply, especially if the economic downturn is prolonged. After much thought I concluded bullets and wine will be in demand. I have learned to make wine and have an extra few bottles that could be traded. The next time Cabela's has a sale on bullets, I suggest you buy some extra rounds of various calibers. Those who will be hunting for their food will need bullets and may be willing to exchange goods you need for your cartridges.
The items mentioned above are just a few of the items needed for a basic family survival plan. You will need to do more research and tailor the plan for the specific needs of your family.
A few months ago, I wrote a column on the Keystone pipeline, which would deliver a steady stream of Canadian oil to the US market. When the Obama Administration rejected the pipeline, Canada decided to sell their oil to the Chinese and they are now committed to building a pipeline to the seaports on Canada's West Coast. Rejecting this pipeline was one of the biggest mistakes of the Administration as it placed our oil supply in the hands of Middle Eastern countries and Venezuela. In the past they have embargoed the soil and caused severe shortages in the United States.
The Administration is about to screw up again. The EPA will likely prevent the Pebble Mine near Bristol Bay Alaska from opening. The company that owns this mine has spent over $100 million to demonstrate that the minerals can be mined without damaging the environment. This mine has the potential to produce over $500 billion of minerals including 100 million ounces of gold (3,125 tons), 80 billion pounds of copper and 5.6 billion pounds of molybdenum. It will also create a lot of high paying jobs. Why is the EPA about to block this project? They are concerned that an accident could cause an environmental disaster that would harm the sockeye salmon in the area. The EPA is ignoring the company's efforts to ensure the safety of the mine and the environment.
In my opinion, we should go for the gold! We can use the jobs and the value added to our economy by the sale of the gold. In the meantime, we will continue to harvest over 22 million salmon each year. Some will be served up fresh and some will be canned and even included in our emergency food supply. Both gold mining and salmon fishing can provide wealth and jobs to the Pacific Northwest. The EPA should stop destroying American industry and jobs. They should out of the way of American entrepreneurs who supply jobs and product to the American people. Otherwise, gold mining will move overseas, just as the Canadian oil is now destined for China.
© 2012 Gordon Smith - All Rights Reserved