It Started In 2009
More on the falling purchasing power of the US Dollar from the Visual Capitalist here:
https://www.visualcapitalist.com/purchasing-power-of-the-u-s-dollar-over-time/
Why I Started My Precious Metals Journey With Silver
Because the collapse of the global financial was such a major fear of mine, much of my early stacking was focused on silver. I was specifically interested in silver because I believed I would be using it for small financial transactions (purchasing food) in the fallout of a fiat currency collapse.
16 years have passed since then, and the US Dollar is still around. In fact, judging its recovery by the US Dollar Index (DXY), it has fully recovered its status as the king of fiat currencies and is currently above its 50-year average (a trend I expect to reverse in the coming years).
Check out the live DXY chart from tradingeconomics.com here:
https://tradingeconomics.com/dxy:cur
What I Learned From My Early Days In Precious Metals
Today I realize that I was naïve to buy into the doomsday narratives being spun by people online from 2008 to 2012. Of course, that doesn’t mean I think the US Dollar is perfectly safe – it will have its day of reckoning! But the entire financial crisis taught me some very important lessons that took me time to understand and apply to my personal financial strategy. They were:
- People trust fiat currency much more than they should. For that reason, its demise is going to be slower than many people would have you believe.
- Many people buy gold & silver as a reaction to their fear. Buying precious metals should really been seen as an act of confidence in its ability to protect your savings like no other asset.
- Most importantly, people plan too much for unlikely emergency scenarios and too little for probable emergency scenarios like:
- Loss of job
- Medical emergency
- Home repairs / Car trouble
- Death in the family
- Reduction in benefits / fixed income
More inspirational quotes on planning here:
https://www.brainyquote.com/quotes/alan_lakein_154655
How I First Calculated How Much Gold & Silver I Need To Have
Understanding these 3 things, I decided to figure out a universal goal. One that I could start stacking towards, but also share with friends and eventually people on YouTube. A target that would prepare myself and others for the likely emergencies I mentioned above – but also prepare us for the less likely scenario of a total financial collapse. Ultimately, I wanted to answer the question – how much gold and silver should I own?
As I didn’t want to reinvent the wheel, I decided that the rule of thumb most financial advisors use (which is to have 3 to 6 months of expenses saved up) was an appropriate starting target to build a gold & silver stack with.
More on establishing an emergency savings fund here:
https://www.chase.com/personal/banking/education/budgeting-saving/how-much-should-i-have-in-emergency-fund
Of course, 3 to 6 months of expenses varies depending on where you live (and I will cover that more later in the article), but I decided that my universal target should be benchmarked to a wealthy country like the United States. By doing that, most people would be covered by the target no matter where they live. Since this was meant to be a minimum stacking target – meaning a first goal for people to strive for - I followed this process:
- Took the average monthly expenses for an American (according to the bureau of labor statistics).
- I eliminated expenses I thought were unnecessary in an emergency (like entertainment expenses).
- I multiplied the monthly figure by 3 to come to a 3-month survival fund.
More on monthly expenses here:
https://www.chase.com/personal/banking/education/budgeting-saving/average-american-monthly-expenses-and-bills#:~:text=Monthly%20expenses%20list,personal%20care%20products%20and%20books.
How Much Gold & Silver My Approach Told Me I Needed To Have
In 2021 when I first did the exercise publicly, the average monthly expenses I identified totaled $4,389 ($13,167 for 3 months). To cover that, with some additional buffer, I set the first level stacking target at 5 troy ounces of gold and 200 troy ounces of silver (a 40 to 1 ratio between silver & gold). This target, when converted to US Dollar at spot price, gave a 3.3-month coverage for an American’s average monthly expenses as per the Bureau of Labor Statistics.
For those wondering why I chose to allocate 64% of my US Dollars to Gold and only 36% to silver in 2021, the answer is simple – volatility! Although I recognize an opportunity for silver to outperform gold over the next 3 to 5 years, gold has proven itself to be the more stable over long periods of time. Because the purpose of this exercise is to put together an emergency savings stack – I think it’s best to put more towards the less volatile of the two metals when allocating money between them.
Link to the original Bald Guy Money Video from 2021 with minimum gold & silver ownership targets:
https://www.youtube.com/watch?v=Oqe2ej13zLw
Has That Amount Of Gold & Silver Stayed Relevant Over Time?
Since my first attempt in 2021 to answer the question - “how much gold and silver should I own?” – the face of the global economy has changed. In 2022, the US CPI went as high as 9.1% year over year in June. The annual rate for that year came in at a whopping 8% - the highest level since 1981’s bout with stagflation! It was around that time and in the following year that people started to ask me – is 5 ounces of gold and 200 ounces of silver still enough?
Link to Bureau of Labor Statistic Inflation Data:
https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm
To determine that, I started with an apples-to-apples comparison of the expenses I counted in 2021 and compared them to where they were in 2024. In line with official inflation figures (which we can question in another article), the average monthly expenses for an American rose 20% between 2021 and 2024. That took the total amount needed to be covered for an emergency from $13,167 up to $15,861 (from 4,389 per month to $5,287 per month).
More data from the US Bureau of Labor Statistics here:
https://www.bls.gov/cpi/
As I am now writing this in September 2024, if we compare the prices of gold & silver to where we were in 2021 when I did the original calculation – you can see that gold is up 42% and silver is up 17%. When applied to our “how much gold & silver should I own” target of 5 ounces of gold and 200 ounces of silver – the total value of that went from $14,300 to $19,039 (an increase of 33% vs. a 20% increase in total monthly expenses). Since our gold & silver outperformed official inflation figures – it means that minimum target amount now covers 3.6 months of expenses vs. only 3.3 months of expenses in 2021.
When we account for increases and drops in the prices of precious metals, I think it’s safe to say that the original target of 5 ounces of gold and 200 ounces of silver is as relevant today as it was back in 2021. For that reason, I stand by it as the ultimate answer to the question – how much gold & silver should I own?
More Gold & Silver Price data at the links below:
https://www.tradingview.com/symbols/XAUUSD/
https://www.tradingview.com/symbols/SILVER/
How Much Gold & Silver Do I Need To Protect My Family?
For those of you wondering is this enough for your family or if you need this much as a single person living in a low-cost state – I’ve got you covered! Below is a screen show from a tool I’ve put together on Patreon where you can see how much gold and silver you need to have as a minimum based on my methodology considering:
- The state you live in
- Whether you’re single or have a family
- Your preferred gold & silver split (if my 40 to 1 ratio isn’t to your liking)
- Results are based on live pricing
Link to Bald Guy’s emergency fund calculator tool:
https://www.patreon.com/posts/gold-silver-fund-87616653?utm_medium=clipboard_copy&utm_source=copyLink&utm_campaign=postshare_creator&utm_content=join_link
Any Tips For People Outside Of The USA?
For my international viewers & readers, the same tool is available for you based on your national averages for the following countries:
- Canada
- Germany
- Australia
- United Kingdom
- India
Link to Bald Guy’s emergency fund calculator tool:
https://www.patreon.com/posts/gold-silver-fund-87616653?utm_medium=clipboard_copy&utm_source=copyLink&utm_campaign=postshare_creator&utm_content=join_link
Final Thoughts
Today, some of you may still be in fear mode like I was when I started in late 2008 / early 2009. You may be anxiously anticipating the end of the US Dollar and collapse of the financial system. To you I say - it’s important to remember that gold & silver are not lottery tickets. Their superpower is not to make you unbelievably wealthy overnight in the aftermath of something many people have died waiting for.
Gold and silver have the unique ability to protect the value of the money you use to buy it – better than any other asset I can name. The example from this article perfectly demonstrates why gold & silver are so important to own and why setting a target for ownership is just as important. Be prepared with silver & gold – just be realistic about what it is you are preparing for.