At ITM Trading we add new information to our website several times a week. Sometimes we add market reports or webinars that our chief market analyst Lynette Zang produces. We also add unique written content developed specifically for the clients of ITM Trading. From time to time the people who read the content we post will leave a comment. Often times in the comment the reader asks a question. These questions are usually the best questions because they address exactly what our clients and future clients want to know about owning gold and silver. Recently a reader by the name of Mary left a question in the comment section of the post she read written by Lynette Zang regarding the SDR becoming the new world reserve currency. Mary wanted to know how to use metals in a crisis situation.
Mary’s question is not uncommon. I find that most often people new to the idea of owning gold and silver are considering entering the market primarily for two reasons. First and most often, potential owners of gold and silver want to safeguard their wealth while making a profit. Secondly, people want to own something that will still have value during a financial or another type of crisis.
Because you can physically own and hold gold and silver bars and coins precious metals can offer you immediate access to your wealth 24 hours a day 7 days a week. This cannot be said for many banking and fiat money products which may require days or weeks or longer to liquidate.
Buy Gold and Silver For Times Of Crisis! ITM Trading’s Online Store For Gold and Silver
While Mary’s question may seem simple the answer is complex. This has to do with the fact that there are many different types of crises, and how you might use metals in a crisis depends on the type of crisis at hand. In this article, I will try to answer Mary’s question citing a currency crisis happening right now as well as a very interesting story about a tragic crisis experienced by a friend of the family. Hang in there, the story is worth it.
How To Use Gold and Silver In A Crisis : Venezuela.
In Venezuela, the citizens are experiencing a currency crisis as you read this. I have written about Venezuela a few times in the past and if you are curious you can find those articles here and here to help bring you up to speed. In a nutshell, the oil-based socialist economy of Venezuela has been breaking down for some time now as oil prices have been quite low. Ultimately the current low price of oil and lack of world demand means that there just isn’t enough wealth available to the Venezuelan government to continue to support its people.
This means that there are food shortages, power outages, lootings, arsons, rapes and murders happening on a daily basis in Venezuela because there is either no currency available or the currency that is available is not valuable enough to purchase goods and services.
Crime is out of control and the military has been tasked with guarding and delivering food shipments. Everything is being rationed. Venezuelan women are traveling to nearby Columbia to sell their hair because their long hair is worth more than the currency in their inaccessible bank accounts.
While those with gold and silver coins and bars may have options that people with paper currency or no currency have when it comes to buying food and necessities, there is also another function of gold in this crisis.
The Financial Crisis In Venezuela: Example of Why You Should Buy Gold and Silver.
As I write this, 12/14/16, India is also going through a currency crisis. But, because Venezuela’s current currency crisis is arguably more advanced than India’s is, the results to date are different. The Venezuelan currency has become nearly worthless. A family that might have once been considered wealthy for having a few million Venezuelan bolivars saved up might now be considered destitute for a couple of reasons. First, the bolivar has dropped dramatically in value and what used to buy a used car is now just enough to pay for dinner.
Secondly, there just isn’t any cash at the banks or in the ATM machines. Even if you have a high balance there are heavy restrictions on how much cash you can withdraw on a daily basis. And this is of course if you can find a working ATM or a bank that doesn’t have its doors chained shut.
In this case owning gold and silver as a diversification out of the government issued fiat currency is perhaps the easiest and surest way to protect your wealth and life savings. Below is a chart showing the price of gold in Venezuela over several years.
Gold Is Stable.
As you can see, gold was very stable in price until the paper currency it was priced against failed. Looking at this chart, would you rather be holding a handful of paper or a handful of gold when a currency crisis hits? In this case, the answer to Mary’s question is to simply own gold and silver. In a crisis such as this, owning physical gold and silver and having them physically available to you is all you have to do to protect your wealth.
How To Use Gold and Silver In A Financial Crisis : A Personal Crisis.
Venezuela and India are two examples where the crisis is countrywide. But, the whole country doesn’t have to have a crisis before gold becomes useful. Let me share a little story with you. My parents are retired. They are not wealthy, but at one point they did manage to purchase a beach house in a four-star resort in a little country in Central America.They spend about half of the year there, and they have made many friends. When I visit they introduce me to their more interesting friends and neighbors. They once introduced me to a very interesting man we will call “Hal”.
Hal was born just a few years before World War II in a small European country. The war left Hal without parents and without a country. Like many, Hal ended up living and receiving an education in Israel. Hal became a pilot and a war hero later in life. Because Hal also had an entrepreneurial spirit and a gift for learning languages it was natural for him to travel the world. Hal often piloted himself in one of the many planes he owned over the years.
Over time Hal became a real estate mogul developing business and residential structures in many different countries including the United States. When I met Hal he was a wiry man in his late 70’s with all kinds of stories to tell. Without a doubt, however, his most harrowing story, was also his most recent. Hal had been kidnapped just a few months earlier.
Kidnapping Happens. Often.
Kidnapping is unfortunately quite common in Mexico, Central America, and South America. Hal was perhaps the wealthiest and most vulnerable target his captors could find. Hal was snatched off the street. He was kept tied and confined in a small crate. Hal’s eyes were covered so he could not see and headphones were taped over his ears so he could not hear. Hal knew he was in trouble because often times even if the ransom is paid the person captured is still killed.
The first time that his captors pulled him out of the box and beat him they demanded $10 million for his release. Hal laughed at them and told them that they might as well kill him now. He explained that he would die of old age before he could list, sell and collect on $10 million worth of international real estate holdings if indeed his holdings were worth that much in the depressed market.
Hal tells his story well. His captors told him that his death could be arranged, they beat him some more and put him back in the box. The next time that they made a ransom demand to him it was for a more reasonable $3 million. Hal gave them the contact information of his family members in the United States that would be able to access and send that much money.
As Hal thought, the family members that the kidnappers contacted had other ideas rather than send the money that would most certainly get their father killed. Rather than begin liquidating real estate holdings his family made contact with some people that Hal knew in the Mossad. Within hours there were Mossad trained agents-for-hire entering the country to look for Hal’s captors.
Because Hal was sometimes able to hear his captors disassembling, cleaning, and reassembling their weapons during the breaks in between the songs that played through the headphones taped to his head, Hal thought his captors were probably military. In this particular country common citizens are not allowed to own guns, so chances were pretty good that if his captors had that many guns and were not shy about being seen with them, then they were probably military. Of course, Hal had no way of getting this knowledge to his family or the Mossad agents.
Once the Mossad agents were in the country, they were quickly able to spread the word. The word was that anyone found to have participated in Hal’s kidnapping would be dealt with severely. The same might be said of anyone related to a kidnapper. Within days Hal was dropped off traumatized and quite a bit worse for the wear on a busy street corner. His captors were never caught.
You might be wondering how buying old and silver factors into this crisis. One thing I will tell you is that over time and travels Hal learned that gold and silver are the only true international currencies. Hal owns both of them. Hal knew that he couldn’t liquidate real estate for $10 million. Hal knew a wire transfer would probably get him killed. Hal knew that kidnappers don’t take checks or credit cards. Personally, I am not sure that Mossad trained mercenaries accept checks or credit cards either. I do imagine, however, that you can finance a Mossad squad quite quickly with gold bars. Gold is international liquid wealth.
You never quite know when a crisis will hit. You never know what type of crisis it will be. One thing that is for certain, however, is that you want to be prepared when a crisis occurs. You also want to know what to do. Holding metals outside of the banking system can give you options that you might not have otherwise. In a crisis, options are always good to have.
Buy Gold and Silver As Security Against Any Crisis
Ultimately, unless you own metals (physical gold and silver) you can’t use them in a crisis. As you have seen in this article there are different types of crises. Sometimes everybody shares the same crisis. Sometimes the crisis is a personal crisis. In any event wealth and power and liquidity are always good tools to have you are faced with a crisis. Physical gold and silver are wealth and power and liquidity.
Mary wanted to know how to convert metals in a crisis. Perhaps now you can see that how you choose to exercise your precious metals wealth during a crisis depends on the crisis. In Venezuela, currently gold is the only truly stable form of transportable wealth. Bolivars are a joke and most bolivar denominated investments have vaporized as the currency continues to crash.
A Couple Of Ways To Convert Gold and Silver.
Real estate values have plummeted as violence erupts and few banks are writing desirable mortgages, anyway. In the case of a Venezuelan, owning gold and holding gold is enough right now. At some point, the gold owning Venezuelan will emerge on the other side of this crisis with options. The Venezuelan can either continue to hold the gold or convert it into the new Venezuelan currency. A third option would be to use the gold to buy up desirable real estate pieces at depressed prices. In Venezuela the holder of gold has options.
In Hal’s case, his family had instant access to liquidity and it paid off when time was short. Hal had seen numerous nations, economies, banks and currencies fail in his time. He had never seen gold and silver become valueless. When it counts Hal knows that gold and silver are easily convertible. Perhaps easier to convert into goods or services than any other type of financial instrument.
Owning gold and silver is a great way to protect and grow your wealth. In some cases owning gold and silver can protect your health. Contact an ITM Trading representative today to discuss adding gold and silver to your portfolio.
We believe that everyone deserves a properly developed strategy for financial safety.
Chief Market Analyst, ITM Trading