Why saving in some precious metal coins is a good idea

by Jun 17, 2014English, Financial, inspirational

Yesterday I got hold of a 1967 Dutch Guilder. This was the year the the Dutch government finally stopped issuing real (silver) money for circulation.
In 2002, with the introduction of the euro, the exchange rate was 1 euro for 2.20371 guilder. So the 1 guilder coin was about 0.45 euro.

If I put the coins in the descending order of nominal value I get: 2 euro, 1 euro, 50 euro-cent and 1 guilder.

Coins ordered by nominal value

As I said this coins is from the year that the normal circulation coins stopped being real money. This coin is actually one of the last that contains 720/1000 silver and weighs 6.5 gram. With the current silver price of 0.47 euro/gram this coins has an economic value of 2.20 euro.

So putting the coins in order of economic value I get: 1 silver guilder, 2 euro, 1 euro and 50 euro-cent.

Coins ordered by intrinsic value

Now assume we want to protect against hyperinflation and we have 1000 euro to change in coins. What would give the highest intrinsic value of my savings?

I can exchange 1000 euro for 500 2-euro coins (7 cent intrinsic), which have a current metal value of 35 euro.

I can exchange 1000 euro for 1000 1-euro coins (6 cent intrinsic), which have a current metal value of 60 euro.

I can exchange 1000 euro for 2000 50-euro-cent coins (5 euro-cent intrinsic), which have a current metal value of 100 euro.

I can buy 454 silver guilders which would have currently 998.80 euro worth of silver in it.

Even if silver looses almost 90% of it’s value in relation to the value of the other metals used in the euro coins, I still have more value left in case of a hyperinflation.

So the order of best value for the buck/euro is the following: 1 guilder, 50 euro-cent, 1 euro and finally 2 euro

Coins ordered by best investment value

Please note that the order is now completely reversed from the nominal value order. Funny to see how we are fooled by these different concepts of value.

So as an insurance against hyperinflation it is a good idea to buy some silver and gold coins on spot-price or very close to it. And stay away from numismatics.