For several years now, particularly with the current state of the US economy, people all over the internet have been adamant about their claims of a major economic collapse, providing a convenient solution as well — precious metals. Wild claims are cited, such as gold reaching $10,000 per troy ounce and silver $1,000, promising huge returns and urging immediate investment. Is there not a contradiction? In an economic collapse, where the dollar would be virtually devalued (though some argue that, being the world’s reserve currency, it just can’t happen), those gains in dollar value would be meaningless. Precious metals ought to be used as hedges against the hyperinflation a currency would experience during the aforementioned economic collapse. Even though there are indicators that suggest the supply of silver may be overstated, the laws of supply and demand would make silver mining profitable enough (as well as other PM’s) to resume on a larger scale once more. Hypothetically, keeping a good watch on the market conditions may give people a chance to sell their precious metals before the supply reaches demand once more, but that is hardly something that can be expected of the majority of precious metal owners.
Therefore, the advocates of investment in precious metals ought to be citing inflation hedging and not easy profit. Videos are constantly put up on YouTube which proclaim the end of the dollar and allude to a near-Armageddon scenario — they are meant to incite fear, not to provoke reason. Feeding on this fear are companies and individuals who are more than happy to sell many silver coins and bullion bars for way over precious metal spot price.
This is not to say that precious metals are entirely immune to inflation. If a large amount of gold would suddenly be introduced into the market, its value would undoubtedly decrease. However, it’s much easier to print fiat currency than to acquire gold at nearly no cost. Thus, the value both types of currency hold — hard currency and fiat currency — still depends on the amount in circulation. The point is a bit more complicated with regards to fiat currency as there is virtually nothing to back up the dollar expect people’s confidence in it, but the concept still applies.