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# Gold and Silver as Mediums of Exchange

Since ancient times, gold has been used reliably as both a store of value and a medium of exchange. Today, in an era in which the world is moving ever closer toward the total elimination of currency and its replacement with plastic cards and even cyber-cash, the utilization of gold as money somehow seems completely out of place. But the possibility of an economic collapse has led many investors to begin acquiring and storing gold away specifically for the purpose of buying essential goods should the worst come to pass.

In most circumstances (including an economic breakdown) gold owners would sell their gold for the currency in use at the time through a gold exchange service, and then use that currency at the store or other marketplace to buy whatever they need. However, some economists hold the view that in a total financial collapse with no reliable currency available, citizens would resort to hand-to-hand barter transactions wherein gold would be used directly as the medium of exchange.

Smaller gold bullion coins (1/10 of an ounce) would be well suited for such a purpose. Of that group, the Â¼-ounce coin is probably the most useful. The majority of countries that mint gold â€?including the United States, Canada, and Austria â€?produce Â¼-ounce coins. They're big enough to pass easily as currency between buyer and seller, and they can be accumulated, stacked and stored largely without the fear of losing a coin or two in the process â€?a risk that the smaller 1/10-ounce coin is prone to. The premium (or, the cost above the market price) on the Â¼-ounce coin is slightly higher when compared with that of the 1-ounce coin, for the reason that the cost of making a coin is roughly the same regardless of its size. In other words, the more gold contained in the coin the smaller the premium per coin weight, because the cost of making the coin is spread over a larger amount of gold.

Those who foresee a potential for using gold as money but are concerned with the possibility of confiscation (governments have been known to take such actions when faced with the threat of the collapse of their currency and imminent economic meltdown) and privacy might consider acquiring uncirculated pre-1933 European gold coins as a medium of exchange, which contain an approximate Â¼-ounce of gold. When used to purchase goods, these coins carry no reporting requirements for either buyer or seller, and because they were minted prior to 1933 â€?giving them recognized status as collectors' items and thus exemption from confiscation â€?they provide an extra degree of safety in that regard.

In addition, a few $1,000-face value bags of pre-1965 U.S. silver coins might also be worth consideration. U.S. silver dollars are often recommended for this purpose (their greatest advantage is that they, too, fall under the 1933 dateline with respect to confiscation) but their premium is relatively high. Silver rounds and one-ounce silver coins of various manufacture, including the U.S. and Canadian mints, are another alternative, although their premiums are higher as well.

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