Jeff Clark, Senior Analyst, GoldSilver
Most of you reading this are already convinced of the need to own gold and silver. But as you continue to accumulate, a question naturally arises: how much do you need?
Imagine the sick feeling in your gut if we get to the next financial crisis and you suddenly realize you didn’t buy enough bullion to get through it. For this reason alone, it’s worth thinking about how many ounces you might need.
More and more investors are recognizing this, and we receive questions about it. The wording varies, but the basic question is the same: how much physical gold or silver should I own to be in good shape should an economic crisis hit?
Traditional financial advice is that gold should comprise 5-10 percent of assets, or 10-20 percent if you’re not including home equity. But Mike and I are convinced that amount won’t cut it in the turmoil we believe is ahead. What passes for “normal” advice could be financially devastating in abnormal times. Furthermore, the lower your overall net worth, the less meaningful these percentages are. And in a time of crisis, you will need absolutes, not percentages.
If you’ve struggled to determine if you have enough physical gold and silver, GoldSilver has created a practical guide for you. This measuring stick is a more effective way to gauge if your allocation will be sufficient.
Which brings up a rather obvious question: when you sell your stash, what will you do with the proceeds?
There will be plenty of options that run the gamut of practicality, whether that means buying undervalued investments, building a family fortune, buying a vacation home or supplementing your income during the crisis.
The point is, you will buy something with those proceeds.
And that is the starting point in knowing if you have enough ounces: will your stash be sufficient to support your standard of living during a major financial disorder? And there is no single right answer to this question. In other words, you shouldn’t just ask “how much silver does Mike Maloney own?” and base your buying habits on that (though I’m sure he’d be flattered). Each person’s circumstances are different, and that means having a unique strategy for yours.
A “major financial disorder” will include inflation, of course, but it’ll be much more than that. The global economy is likely to undergo a series of crises, only one of which will be inflationary.
And those crises won’t resolve quickly. As a result, we need to be prepared to weather all storms that hit our economy, markets and monetary system, even if they last for several years. We’ll be living through the entire transition period. And that means we may need to supplement, or fully support, our standard of living during that time.
It is with this reality in mind that the following tables were created.
I calculated how much gold and silver you would need based on two factors: 1) your monthly expenses, and 2) how long the crisis period lasts.
(Note: the chart assumes the gold price keeps up with inflation, though history shows it is likely to far surpass CPI readings. If so, it’s possible we’d need less than what is shown. It also assumes you pay the taxes from another source.)
Here’s the table for gold:
To determine how much gold you should buy, find the monthly expense amount that will support or replace your current standard of living, and then match it to the duration. If you want to supplement your expenses by $500/month and the crises last three years, you would need about 14 ounces of gold to get through it. If you want to cover $3,000 in monthly expenses, you’d need 45 ounces to meet a crisis period of two years, and 90 ounces if it lasts four years. Those already well off or who want to live like Mike or Alex should use the bottom rows of the table.
Of course, we own silver, too. Here's how many ounces you’d need if you’re using silver proceeds, again assuming the price keeps up with inflation.
A $500/month supplement would need 300 ounces of silver to get through one year, or 1,500 ounces for five years.
If you want $3,000/month, you’ll need 1,800 ounces for one year, or 9,000 if it lasts five years.
Of course, we can use both gold and silver to meet expenses. For $1,000/month, you’ll need nine ounces of gold and 600 ounces of silver to get through a two-year crisis period.
These amounts may look high, but keep in mind that if you don't save in gold and silver now, you'll be forced to spend a whole lot more in currency later.
These tables show how practical gold and silver can be. They really can be used to protect our standard of living — and even improve it if the price of precious metals rises during times of crisis like they have in the past.
So how much gold and silver do you need? I hope these tables show what you need to accumulate.