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Industry Spotlight > Broker Dealers

Will gold really protect you if the dollar collapses?

By Rodney Ballance

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Every day, my email inbox is littered with urgent notices and important warnings. They’re all trying to convince me of an impending monetary collapse and devaluation of the United States dollar. Consequently, every one of these messages comes from people who either sell gold and silver, or are sponsored by people who sell gold and silver. 

I began to wonder, is our currency really in such terrible shape? Are we indeed headed for a collapse? Do these people really know something I don’t? Asking these questions drove me to conduct some unscientific, real life research. 

People from all over the world have turned to me for financial guidance, especially people wanting to protect what they have worked so hard for over the years. I needed to know without a shadow of doubt what the true value of their gold is, because of the respect I have for them and also to ensure my guidance was built upon facts. 

The first thing I did was call some gold dealers and ask, “How much can I buy an ounce of gold for today?” One dealer told me I could come into the store and purchase a one-ounce bar for $1,245, or a 22-karat “gold eagle” cold for $1,271. He further stated that the gold coin would be much better to have when the dollar dies, because it would be easier to sell. 

The day I made these calls was September 30, 2014. The spot price (what an ounce of gold sells for on the open market) for an ounce of gold was $1,208. The dealer price was $37 per ounce more than the open market price for the one-ounce bar. The golden eagle coin was $63 more than the spot price for an ounce of gold. 

When someone says, “I’ll be able to sell my gold when the dollar dies,” my question is: What would you sell it for? Would you sell your gold coin for in exchange for U.S. dollars, which have supposedly just died? Something just isn’t adding up. So I thought, why not call the people most of us would reach out to in the case of an immediate economic crisis that would prevent access to cash. 

My next calls were to local gold and silver buyers and pawn shops. I was shocked to learn that there was an enormous variance between what the same gold costs to buy, and what someone is willing to pay for it. While the spot price for gold was still at $1,208 per ounce, the buyers were only willing to pay $1,098 per ounce. 

If I were to buy an ounce of gold and sell it while the spot price was exactly the same, I would lose $173, or 13.6 percent. 


The gold and silver buyers were going to buy my gold eagle coin and melt it down. That collectible, which was sold to me as the premier coin to own because of its demand, was to have the same fate as a broken earring. I continued my quest to better understand why so many people are drawn to this unregulated industry that seems to prey on the fear of its patrons. 

What, you didn’t realize that the gold and silver dealers, the precious coin market, and buyers of metals aren’t regulated? Well, it’s true. There is no oversight of this predatory industry whatsoever. I guess that’s why I got different stories from every dealer I spoke with about which is the best form of metal to have in case of economic disaster. 

The first place I called told me that collectible coins were the perfect hedge to protect my assets. The next place told me that bars of gold bullion would be the best choice. After digging a little deeper, I realized that the first dealer had no bars in stock, so his best recommendation would be for me to buy what he had. The second had bars, which made that the best choice. 

The other telling sign that I was speaking with less than professional experts was that they would each say, “He’s lying to you.” If each of the dealers said the other one is lying about valuation and redemption, then who is really telling the truth? Furthermore, without some entity overseeing the education about such an issue, where can you go to learn facts about what you would need and which is the best way to invest? 

After my research into this issue, I found the following to be true:

  • People urging us to buy metals are paid by those who sell it to stir our emotions (primarily fear) and prevent us from making a rational decision.
  • When we rationalize the choice to buy metals for protection, we find that it makes absolutely no sense to trade perfectly good money for any material whose price can be manipulated at will.
  • If we were to face economic disaster today, those with metal would have to sell that metal for currency in order to purchase basic life-sustaining goods and services.
  • The value of that metal would be based on what the dealer wanted to pay you.
  • Supply and demand. The demand for people to sell would create an abundant supply which would drive the selling price down.

To close this article, I would simply recommend that everyone considering the purchase of precious metals take a step back and rationalize their decision. Understand that the only acceptable currency at most American retail locations today is the dollar. 

Just as your local hardware store isn’t set up to accept Euros or Yen, they also aren’t set up to accept precious metals. In fact, if you were to take a 1962 silver dollar to a retailer, they would see it as $1. When you purchased that coin, it sold for as much as $19. The dealer who sold you that collectible coin more than likely said something like, “You need this because it can be used as currency when the dollar dies.” 

When you make financial decisions of any kind, make sure you only work with licensed professionals in an industry that has rules and regulations. Make sure you work with professionals who are accountable to regulatory entities set up to protect the consumer. Always think past the emotions and ask yourself this question: “If I take this person’s advice, and it turns out to be wrong, who has the most to lose; the seller or the buyer?” 

I hope this message will help anyone who is considering the purchase of precious metals for protection. It appears to me that the only protection you need is to be shielded from those who would say or do anything to sell you that so-called “protection.”

See also:

Frustrated by fear: 82 industry leader opinions