Adam Taggart did a piece late last week asking Jeff Clark “How many ounces of Gold (Silver) should you own?” (Jeff Clark: So How Many Ounces of Gold (or Silver) Should You Own?)
He did 2 charts (one for Gold and the other for Silver) assuming various monthly budgets and assumptions on how long inflation lasts. He uses an assumption of either 10% or 15% to do his calculations, it is not clear. There are several flaws in the logic, the biggest is that he uses current Gold and Silver prices while assuming a high inflation rate and does not allow for higher prices which would surely be the case with inflation ramping up. He also assumes that the metal is THE only asset that one may have to pay monthly expenses with and it looks like he is making the assumption that there is no income from whatever job you might have. While not really correct in my mind, this is a very good article to read to get YOU to do the math for yourself as to “how much is enough?”
Let me say that once the onset of inflation begins (it is already started), I do not think it can EVER be stopped without changing the currency/monetary systems. For starters, you can’t have 15% inflation and 0% interest rates… for very long. Sovereign governments as a whole cannot afford even 6-7% interest rates, they could not pay the interest on their accumulated debt. Of course, this brings into play even more “printing” to pay the interest and the hyperinflation cycle gets more gas for the gas tank. My point is this, once the ball gets rolling and it is understood and public knowledge that inflation is running wild, nothing short of a change in the global monetary system can or will be able to stop it. There is ZERO ability of a new Paul Volcker riding into town and jacking up interest rates to quell inflation, this is no longer an option. In fact, there are no options left other than how hard they press on the accelerator (print). There is no brake, there is no steering wheel, there is nothing… other than the accelerator pedal.
So, how much is enough? In my opinion, you should have as much as you can afford to purchase. It makes no sense in my opinion, if you know that the currency is mathematically doomed to hold anything more than 6 months or 1 year’s worth of liquid cash. You are receiving no interest and the currency itself is losing value every day. This loss of value will only accelerate as debt increases and central banks print in support.
In my opinion, if you have no metal whatsoever you should start with Silver. If you can afford it, 1 junk bag per person per household should be your goal. This amount should get you through with the ability to purchase (barter) necessities. If whatever breakdown that’s coming lasts longer than you spending a bag of Silver for rice, beans and tortillas then we will have arrived at Mad Max world. If this is the case, no amount of precious metals will do and life won’t be worth living anyway. Once you have accumulated 1 bag per person, then you can accumulate Gold. You might want to diversify further with some platinum as a hedge against the insane act of confiscation. I cannot imagine Silver being confiscated but stranger things have already happened.
I don’t believe that making a chart of how much you should own really does the trick here. If you don’t have the means, you can only purchase what you can purchase. If you do have the means, the question becomes what percentage of your assets do you want to deploy into the metals and shares. I look at this question differently, I look at it when all is said and done as “how much of your asset base do you not want destroyed.” Personally, I have been 100% invested in the mining shares and metals since 1998 and only kept enough cash on hand for 3-6 months. Yes, extreme but I put my money where my mouth was.
As a side note, I did the reverse of what I believe now. I started with the shares and took profits where 50% went into metals held and stored overseas. I used the early growth of the shares to build physical. We surely do not have the time left to accumulate in this manner and unless you started with the shares in late 2008, the profits have not been as easy. If I were starting today, I would begin with Silver, put my serious money into Gold and my speculative money would all point toward various mining shares.
The easy answer to the question of “how much” is simple and depends on who you are. ANY metal that you accumulate will be better than nothing at all. I assure you that when this monetary storm hits and what was “common belief” gets swept away, you will see some people that you believed were wealthier than anyone you knew… picking through garbage cans to eat because THEIR money won’t spend. I pray that we don’t get to this point but logic tells me there is no avoiding it.