Guest Post: So How Many Ounces Of Gold (Or Silver) Should You Own?

Tyler Durden's picture

Submitted by Adam Taggart of Peak Prosperity,

This week, Chris talks with Jeff Clark, Senior Precious Metals Analyst at Casey Research, where he serves as editor of their Big Gold newsletter.

They tackle head-on many of the questions weary precious metals investors are wondering after enduing the volatile yet range-bound price action of gold and silver over the past year:

  • Have the fundamentals for owning gold & silver changed over the past year? No
  • What are they? currency devaluation/crisis, supply-chain risk, ore grade depletion
  • How should retail investors own gold? Mostly physical metal, some quality mining majors (avoid the indices), and ETFs only for trading
  • Is gold in a bubble? No
  • Could gold get re-monetized? Quite possibly
  • Where is gold flowing? From the West to the East. At some point, capital controls will be put in place

What the politicians are doing is the exact opposite of what they need to be doing. We continue adding to our debt, we continue raising the debt ceiling, we continue deficit spending, we continue borrowing money, and, of course, we continue printing money. We are doing the exact opposite of all the things that would lead us away from inflation. So yes, I think that is an important point.

 

I will add that inflation has occurred very quickly, very rapidly, very suddenly many times in the past, just in recent history. If you look back at the high inflationary times, just in the past 100 years here in the U.S., many of those that hit 12%, 14%, 15% -- two years prior to then, the CPI was completely benign. It was 1%, 2% – I think at one point it was 4% – and then all of a sudden within 24 months, it was 12%, 14%. So it can happen very suddenly, and my fear is that is what is going to happen this time. People are in a lull; no one is expecting it: the CPI is low; nothing is really happening with all this money printing; there has been no fallout. But I think that is the critical point. You cannot do these kinds of things we are doing forever and not experience any consequences. Sooner or later there are going to be consequences to what we are doing, and my fear is that it is going to be nasty, catch a lot of people off guard, and really hurt our society. The bottom line for me is, that is why I am buying gold and silver, still, to this day.

For these reasons and others, Jeff strongly believes everyone should have exposure to gold and silver as a defense for preserving the purchasing power of their weath. The key question is: how much exposure?

You want to focus on how many ounces you own, not necessarily looking at whether the price is $5 higher today than it was yesterday. How many ounces do you own? That is really the question you want to ask yourself, so you can focus on how much you are really going to need, and the amount really comes down to this.

 

For me, I am probably going to use some of this gold if we get high inflation. How are you going to protect your standard of living if we get some kind of runaway inflation? And let’s say it's not runaway hyperinflation; let’s just say it's high inflation, 10%, 15%. Remember it was 14% in 1980, so the odds of us getting high inflation are realistic. So if I am going to use that gold to cover my standard of living, you are going to need about two thirds of an ounce of gold for every thousand dollars of monthly expenses. If you want to protect your standard of living and not have your house be ravaged by inflation, so to speak, so that is a good guideline to follow.

 

So if inflation lasts a couple years, well, you are going to need 15 ounces of gold for every thousand dollars of monthly expenses. That is a good guideline to think about. And if your expenses are more per month, you are going to need more gold than that. If inflation lasts longer than two years, you are going to need more than that, but you can actually use the sales of gold and silver to protect your standard of living. You sell some gold and silver, you are going to get U.S. dollars or Canadian dollars with it and you can use the increase in the gold and silver price to offset the increase in the goods and services you are buying.

 

So I think that is the way to view it, to look at how you are going to use it. And so the focus again comes back to how many ounces do you own? So if you do not have any, you need to obviously start buying. 

Here are two tables -- one for gold and the other for silver -- Jeff offers in his newsletter to help investors calculate the requisite ounces needed to protect against rising inflation over time:

The point here is that you're probably going to need more ounces than you think. Look at your bank statement and assess how much you spend each month – and do it honestly.

 

The other part of the equation is how long we'll need to use gold and silver to cover those expenses. The potential duration of high inflation will dictate how much physical bullion we need stashed away. This is also probably longer than you think; in Weimar Germany, high inflation lasted two years – and then hyperinflation hit and lasted another two. Four years of high inflation. That's not kindling – that's a wildfire roaring through your back yard.

 

So here's how much gold you'll need, depending on your monthly expenses and how long high inflation lasts.

 

Ounces of Gold Needed to Meet Expenses During High Inflation
Monthly expenses in US dollars Monthly expenses in gold, oz* Inflation Duration
6 months  1 year  18 months 2 years 3 years 4 years 5 years 
$500
0.31
1.9
3.7
5.6
7.5
11.2
15.0
18.7
$1,000
0.63
3.8
7.5
11.3
15.0
22.5
30.0
37.5
$2,000
1.25
7.5
15.0
22.5
30.0
45.0
60.0
75.0
$3,000
1.88
11.3
22.5
33.8
45.0
67.5
90.0
112.5
$4,000
2.50
15.0
30.0
45.0
60.0
90.0
120.0
150.0
$5,000
3.13
18.8
37.5
56.3
75.0
112.5
150.0
187.5
$10,000
6.25
37.5
75.0
112.5
150.0
225.0
300.0
375.0
$20,000
12.50
75.0
150.0
225.0
300.0
450.0
600.0
750.0
*Based on $1,600 gold price

 

If my monthly expenses are about $3,000/month, I need 45 ounces to cover two years of high inflation, and 90 if it lasts four years. Those already well off should use the bottom rows of the table. How much will you need?

 

Of course many of us own silver, too. Here's how many ounces we'd need, if we saved in silver.

 

Ounces of Silver Needed to Meet Expenses During High Inflation
Monthly expenses in US dollars Monthly expenses in silver, oz* Inflation Duration
6 months  1 year  18 months 2 years 3 years 4 years 5 years 
$500
17.9
107.1
214.2
321.3
428.4
642.6
856.8
1,071.0
$1,000
35.7
214.3
428.5
642.8
857.0
1,285.6
1,714.1
2,142.6
$2,000
71.4
428.5
857.0
1,285.6
1,714.1
2,571.1
3,428.2
4,285.2
$3,000
107.1
642.8
1,285.7
1,928.5
2,571.4
3,857.0
5,142.7
6,428.4
$4,000
142.9
857.1
1,714.2
2,571.3
3,428.4
5,142.6
6,856.8
8,571.0
$5,000
178.6
1,071.4
2,142.8
3,214.3
4,285.7
6,428.5
8,571.4
10,714.2
$10,000
357.1
2,142.6
4,285.0
6,427.8
8,570.4
1,2855.6
17,140.8
21,426.0
$20,000
714.3
4,285.7
8,571.4
12,857.0
17,142.7
25,714.1
34,285.4
42,856.8
*Based on $28 silver price

 

A $3,000 monthly budget needs 1,285 ounces to get through one year, or 3,857 ounces for three years.

 

I know these amounts probably sound like a lot. But here's the thing: if you don't save now in gold and silver, you're going to spend a whole lot more later. What I've outlined here is exactly what gold and silver are for: to protect your purchasing power, your standard of living. 

Jeff discusses the Hard Assets Alliance as a solution worth considering when purchasing bullion. For more information on the HAA can be found here. 

Click the play button below to listen to Chris' interview with Jeff Clark (46m:01s):

 

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SilverTree's picture

I thought one tenth of an oz of silver is worth ~20 hours of labor...

r3phl0x's picture

That's $0.165 USD/hr -- maybe in a Foxconn sweatshop, or privatized US prison.

SilverTree's picture

Correction:

~12 hours for one tenth of an oz of silver.

Honest Work For Honest Silver Pay

Silver Shield

http://www.silverbearcafe.com/private/08.11/honestwork.html

icanhasbailout's picture

The general consensus seems to be that the proper amount of silver to own is 30 pieces.

The Shootist's picture

Roman soldiers were paid a silver denarius per day. About the size of a silver dime. Job description: brutal hand to hand combat against barbarian hordes.

Dr. Sandi's picture

Similar work to being a Wal-Mart cashier on Black Friday.

Pool Shark's picture

 

 

The wages of sin is death.

But, the wages of a retail clerk are far worse...

 

Joe Sixpack's picture

About 116.9 oz. per month (silver) or 116.5 grams of gold per month.

What Do Silver and Gold Buy?

By John Q. Public

Half_A_Billion_Hollow_Points's picture

This article was clearly written by someone who's never lived through a long period of hyperinflation.  You don't spend gold or silver.  

You become a snake, you sit and wait.

You adapt your life to spend your income immediately, and you wait, and wait, and wait some more for the strike opportunity.  As people become more and more under stress, valuable assets come up on the cheap in terms of gold/silver.  That's when you grab them up.  Notice that people are happy to sell them to you--the bankers have destroyed their lifes and they need the hard money more than anything else.  

If you think you're going to spend gold/silver on a monthly basis, you'll only be painting a huge target on your back, and your stash will be clear to everyone.

Stupidest thing I've ever read on ZH.

Ginsengbull's picture

How much gold did they pry off the fingers of the victims of the Japanese tsunami, or scavenge from their houses during cleanup?

When the SHTF, everybody sells, and that is the best time to buy.

DoChenRollingBearing's picture

DoChen has a different way of looking at how much gold to own (I will limit my remarks here to gold, if possible EVERYONE here ought to own silver IN ADDITION to the gold).

There are +/- 6 billion oz of gold, approx. one oz per person in the world.  If we stipulate that Americans are 5 - 10 times "wealthier" (hey just sayin', OK?), then each American ought to own at least 5 - 10 oz each.  So, a family of three should own from 15 - 30 oz of gold.

That is the average American (family).  I would guess that your "average" ZH-er should own AT LEAST TWICE the above.

Get cracking, bitchez!

boogerbently's picture

": the CPI is low; nothing is really happening with all this money printing; there has been no fallout. But I think that is the critical point. You cannot do these kinds of things we are doing forever and not experience any consequences"

TwoShortPlanks's picture

IMO the secret to Gold & Silver in a major crash followed by a Depression is simple. Dig a hole and forget about it. Go through the pain like everyone else. Then, once the dust is settling, dig up your stash and buy that which reboots the economy or survival process. You need to think about the uplift AFTER the storm, when money converges again.

Yes, Gold can/will reduce pain, but you're spending something which has far more purchasing power if you can hold-off till the right time. Why hedge inflation when there's a 100-1000 bagger for your kids.

_underscore's picture

+1

Yes, a weird article that.  Apparently, Mr & Mrs with the 3 kids will just start using the 'gold card' once the digits start revolving like a slot-machine on prices & just carry on as before. IMHO, when high or hyper inflation starts (and assuming you're comfortable in PMs) you batten down the hatches & make sure your fiat buys (other) useful stuff - storable food, tools, materiel etc. The putative spenders in the above article would just keep going to Wendy's, the Mall & multiplex as 'normal' - a bit like people in trauma shock or something.

The ability to pick up substantial goods/materiel (in the latter stages) & when a good opportunity presents - can be the use of PMs , not buying bacon butties & plastic crap like the money's burning a hole in your pocket.

robobbob's picture

Is that before or after the profligate bread and circuses emperors debased the currency until it was nothing more the silver washed copper? and finally only copper?

Mr Lennon Hendrix's picture

And this was how Rome was taken.

Blessed with a strong army but most importantly knowledge of Rome's financial troubles Constantine waltzed into Rome while his troops stayed at the City-State's gates.  He met with the priest class who gave the King's their crowns and informed them that he knew they were broke and that the Treasury had been looted.  He gave them two choices:  name him God's chosen ruler of Rome and her lands or he would bring his troops in and take it.

In exchange they would work together to form a new religion, one true religion.  The priest class and he would form the Church and rule together.  The priest class agreed knowing full well they did not have the funds to fight back and must have liked the idea of having one God to collect charity in the name of.

This is the power of knowledge and money - when you have them you are on the hill and when you don't you are fighting a losing battle.

EnslavethechildrenforBen's picture

Enough to afford a lifetime supply of twinkies

Peter Pan's picture

You should own as many oz as you can afford, as you can defend and/or hide.

RockyRacoon's picture

Your comment could have comprised the entire article.  Since gold has infinite marginal utility, one should own as much as can be had... period.   All computations will, as do strategies, fail after the first battle with inflation.

http://en.wikiquote.org/wiki/Helmuth_von_Moltke_the_Elder

WhackoWarner's picture

Maybe a good post but I take exception to the mathematics here.

As you see the tables assume a $1600 price. I would assume that my foresight at buying gold years ago with all this in mind also included the idea that gold would outperform as would silver.

As such the amount of ounces projected here to survive are vastly overstated.  I would assume as hyperinflation hits gold/silver will also increase in value (probably out-pace inflation many fold).  So this is good to get one thinking but really does not answer the question of how many ounces are adequate.

I think you have to put this in perspective as it assumes we are all millionaires already who can afford thousands of ounces of gold with the idea that all we are going to do is stand still.

WhackoWarner's picture

And further to this.

This chart is simplistic in that it assumes you have no income flow and have been unable to prepare for some of this in advance.

Fer instance 1.5 years ago I watched the futures markets on various agri goods. I bought up every sale on large cans of coffee on sale. I hae 24 months of cheap coffee that is now 4 times the price on the shelf.

Inflation is already here and one must be astute by protecting your family through more than ounces of silver and gold.

I am still of the mind that I will pay off my debts with devalued fiat that will come from my gold/silver sales.

Got all the food etc. stashed already for a 2 year run. At least I will be able to cost average any future purchases I need.

But then I am a woman who looks at the real inflation judge; which is the supermarkets.

klockwerks's picture

Whacko, well stated as those were my exact thoughts as I read it. My advise is buy as much silver/gold as your budget can withstand and stack it for the safety of having your hedge against all future issues.

RagnarDanneskjold's picture

In The Economics of Inflation: A Study of Currency Depreciation in Post-War Germany, by Constantino Bresciani-Turroni, he had a table showing the real value of assets and goods at the end of the inflation. Stocks and real estate gained some value, but gold was at the top of the list at 200, in other words, gold doubled in real value again everything else.

The only people who will need to spend gold to finance their standard of living are retired people with no other assets.How many broke ass retired people have a stash of gold?

Anyone with income would be wise to accept a drop in their standard of living and use the gold to buy assets. It's stupid to spend your gold to keep your standard of living flat during hyperinflation, when you could at the very least double (and probably triple or quadruple) your standard of living on the other side by holding gold and swapping it for cheap assets during the inflation.

SILVERGEDDON's picture

Short form of the post - buy every motherfucking ounce you can get your hands on soonest.

After all, "It only takes five dollars to get it out of the ground"

Yo, Million Dollar Bonus - crawled out from under all those long puts on Facebook paper yet, mo fo ? 

jez's picture

Correction:

~12 hours for one tenth of an oz of silver.

 

Silvertree: you're hired! USD 3.23 (at Friday's close) for 12 hours of your time. My whole house needs painting. Be here at 8am sharp, Monday morning.

 

Vooter's picture

Don't listen to him! I'll pay you $6.46 per 12 hours to paint my house...I might even consider jacking it up to $9.69 if you're good...

r3phl0x's picture

Good article but they forgot to include the "ounces of ammo" table.

robobbob's picture

you have to work that out individually

how good a shot are you?

Peter Pan's picture

The article seems very practical until you realise that there aren't enough oz around in the USA to enable preparation.

SILVERGEDDON's picture

Short form of the ammo requirement - every motherfucking round you can get your hands on, times ten. Great currency after SHTF, bitchez. No short selling that shit.

awakening's picture

Only problem with money is that it recirculates, my issue with bullets as money in this scenario is how quickly I gain repossession of it.

http://www.youtube.com/watch?v=9vxK4kf4AqA

YC2's picture

This is a dumb article.  If the scenarios he outlines happen why would he be out spending his money as capital as if it were money as income at such an inopportune time? Actually, there is no opportune time. 

 

The long story short of it it that you go from hard assets into cash flowing, leverageable assets, and wait.  Basically buy something like real estate, wait for normalization, and you will not be worrying about cannibalizing your nut during the transition.  People that did this in argentina with dollars made out like bandits when the economy could releverage itself.

 

And, in the case you actuallt need to use metal to barter, keep some silver dimes around.  I cant wait to sell a bag of beans to this retard when he brings his krugerrands to the farmers market.  And being prepared to not run out of food staples in the first place will cost a lot less than 700 oz of gold right now.

Money Squid's picture

"If anybody has any idea of hoarding our silver coins, let me say this. Treasury has a lot of silver on hand, and it can be, and it will be used to keep the price of silver in line with its value in our present silver coin. There will be no profit in holding them out of circulation for the value of their silver content" Lyndon B. Johnson

BidnessMan's picture

Really laughable. LBJ was a pompous ass on so many levels. The Fed's silver stash is long gone. A pre-1965 dime now costs $2.30. A nice profit.....

Money Squid's picture

Statement of the FedGov's interest in supressing the price of silver? I believe they moved into creating paper markets (oil, gold, silver, wheat, corn) to make price manipulation easier - no need to worry about dishoarding physical into the market when you can dump paper to depress prices.

Urban Redneck's picture

What is described is not "investing" it is "saving"

Similar to how a government does not "invest"  but rather "spends"

debtor of last resort's picture

It's about how many ounces can you afford?

fonzannoon's picture

There are a few things here I have a problem with. I don't think we get high/hyper inflation with stagnating/declining wages. If we somehow get massive wage growth and hyperinflate then my monthly mortgage payment (which is mine, and I assume many on here's biggest expense) becomes a very small problem. It's the variable costs (food, fuel) that get out of hand. But those are the expenses I assume people are actually saving in metals to protect against.

It's the scenario he presents that I fear the most. Inflation at high levels but not high enough to blow a hole in the fed. Some nasty ass stagflation or biflationary scenario (Spain/Italy) that drains people of their PM's as they fight to keep their head above water. Then PM's really did not serve that much of a purpose after all.

DosZap's picture

fonzannoon.,

Then Pm's really did not serve that much of a purpose after all.

Well, HAD they enough of it saved it would, correct?.9 of 10 families likely had NO AU or Silver stashes, they just sold off family jewelry.

Most had NO clue how really bad it was going to be,when this crap hits(like Hyper-inflation first, then deflation), in crappy times, as he shows just a glimmer 3%, to 20%.....................that isn't close to Hyper.

Read jsmineset.com articles today on this very issue, and check out the scenario in place during Weimar.................blow your mind,how fast it hit, and things were crappy BEFORE it did.

MIRROR image of US now.

fockewulf190's picture

What is scary is that most of the sheep have already hocked whatever scrap gold they may have had laying around, and blew that cash ages ago on bills or food or booze or some chinese made trinket or two.  They will be the victims of the upcoming economic Frankenstorm that is already on the radar and marching it's way towards America.  The howling and yammering will be loud and unceasing.

For those 1% of us who are stacking, you should also be thinking ahead and planning about how you can reduce your future expenses and preserve your stack.  Count on government to want to take as much as it can from you, and then some.  Expect the unexpected such as crushing energy costs, outrageous property tax hikes, new assesments, increased garbage collection rates, local sales tax hikes, and increased fines and fees for everything...especially if your living in the northeast.   Hopefully you will have something left from your stack once the Great Reset is over.  If your close to retirement, George Carlin will be proven right...they are going to come after your Social Security and probably your pension and in the system savings as well if your lucky enough to have some. 

bloostar's picture

There's already the beginnings of capital controls starting in the uk. Overseas pension transfers have recently been tightened to the point of a vigorous wedgie and the requirements for reporting are more bureaucratic than a socialist's convention. It's on its way for sure.

HungryPorkChop's picture

Most countries that have experienced hyperinflation had declining or stagnant wages before it began.  Below is an interview from the founder of Shadowstats regarding his hyperinflation forecast:

https://www.youtube.com/watch?v=btiApeHpBWg

Seasmoke's picture

and here, i thought the 50 ounces of gold and 1000 ounces of silver i lost , was a big deal

fonzannoon's picture

If that is what you are rocking I think it is a huge deal. I think the numbers he speaks of are waaay off.

fockewulf190's picture

Thing is, most of us have never lived through truly hard times with Hooverville type depression, so we really don't know yet how bad it will be, and our debt levels are a quantum sprung higher than anything experienced during the 1930's. If we get a Greece or Spain scenaro within the US, there will be chaos....and Road Warriors.  If your a middle class stacker, I see no current reason why you should stop stacking regardless of how much you already have.

Bobbyrib's picture

"Thing is, most of us have never lived through truly hard times with Hooverville type depression, so we really don't know yet how bad it will be, and our debt levels are a quantum sprung higher than anything experienced during the 1930's."

There are tent cities in NJ. We might be a little closer than you think.