Gold or Silver...Which?

May 5, 2001

As a precious metals broker for close to 24 years, I almost daily get questioned as to which precious metal is the most desirable, or prudent one in which to invest. Both have definite advantages, and both are wonderful. To have one's surplus assets in a safe, accessible place, where they can be seen, touched, or even played with, is simply great.

But first, a word about storage is in order. Where should you store your valuables? The first thought by most, is a safe deposit box. I say no. Why? If one ever gets into trouble with the IRS, or other governmental agency, such boxes and their contents can be either confiscated or frozen. When one dies, all assets, including safe deposit box contents are frozen for probate. The only possible way of avoiding this, is to put the registered name of the box holder in the collective names of all family members, which I hope might stop a probate court from seizing its contents, but I am not sure. I am no lawyer. I frown on banks and safe deposit boxes.

I want to be able to get at my savings and valuables quickly and conveniently. Suppose a bank goes belly up? Your assets are inaccessible. Buy a safe, hide them in the attic, bury them under a sewer pipe to escape metal detectors, hide them in the most absurd, inconceivable place you can think of, but keep assets accessible. One of your guns and some ammo should be instantly accessible, without having to dig or rummage. This is for instant protection. One can never tell what may happen. When all seems to be nice, peaceful, and friendly, is usually when all hell breaks loose. Ask anyone who has ever gone through robbery, mugging, bankruptcy, divorce, or owned the NASDAQ! Boom! You wish you had prepared in advance. Do so.

The choice is yours; gold or silver. Which is best? There are many theories about this, and in the long run, it may not make much difference, but in case the reader wants to know the reasons for each, try these.

Gold has been actual money for 3,000 years, and possibly even longer. Silver has also. No answer there.

Gold can be dredged up from the bottom of the ocean after hundreds of years, and won't need polishing. Gold never tarnishes. Silver does tarnish, and to keep it shiny it needs to be polished or sealed in an airtight container. An argument for gold.

Gold, on a per dollar invested basis, takes but a fraction of the space for storage as silver. An argument for gold.

Silver is much less valuable, and possibly, when paper money collapses totally, a U.S. silver dime may buy a quart of milk, whereas it is impossible to divide gold into that small a size. US silver coins are currently the cheapest per ounce method of owning silver, at under $4.80 per ounce. A one ounce silver round ($4.95) may get you 5 gallons of gas, or some groceries. The smallest gold coin is a twentieth of an ounce, ($18) and its size is so microscopic that it is easily lost. I won't handle them. An argument for silver.

Gold is much easier to hide, certainly a plus when keeping assets away from prying eyes or confiscators. - An argument for gold.

Then there is the fact that silver used to be a sixteenth as valuable as gold, if you look at what the U.S. government bought for coinage. On the other hand, since I have been in this business, I have always used the ratio of 35 to 1, not 16 to 1. In other words, if the ratio of gold to silver is more than 35 to 1, purchase silver, and if it is less, purchase gold. When gold went to $850 and silver to $54 in 1980, you shouldn't have bought either, but the ratio then, was under 16 to 1. Today, the ratio is about 60 to 1, ($266.50 to $4.41) and to me, an indication, that silver is a better buy.

There is a supply shortage of both, and there are far too many tons of both paper gold and paper silver to suit anyone with a grain of sense, meaning that both are headed for the stratosphere in paper dollar purchase prices. No argument for either, but surely a reason to get out of paper dollars.

Gold is used for jewelry, as is silver, no argument for either.

Gold is preferred by the Orientals and Indians. Are they smarter? I doubt it, but as far as metals are concerned, they might be. An argument for gold…possibly.

Silver is used for a variety of commercial things such as computers, electronics, and film. It is a superb conductor of electricity. Silver's commercial use is not likely to diminish. Gold is used for jewelry and asset storage, but rarely in manufacturing. An argument for silver.

Then there is the cost of production of anything we buy and need. Today, gold can be produced for the current $265 per ounce in some places, whereas silver cannot be produced for $4.41 anyplace! It costs $11 per ounce to produce silver in America, and over $6 in Mexico, where it is said there are huge amounts of un-mined silver. No one is going to mine silver at $4.41. To me, one should always buy any product as close to its cost of production as is possible, unless the product is from China or Japan. In the case of precious metals, the choice for me is silver. Not American Silver Eagles either, which are $1.50 per ounce higher than a 1 ounce .999 pure silver 'round' with an acceptable hallmark. (see my web site, and click on "silver") Always get the most gold and silver for the least dollars, and currently in gold, it happens to be the Krugerrand. This means absolutely NO numismatics, which are the least gold and silver for the paper dollars spent.

Why obtain either? Because pieces of paper with ink on them, have historically become worthless in 100% of the cases, including here in America three times already. It should be four times, because in the last 75 years, the dollar has lost about 98% of its purchasing power. During the 75 years before that, when they were 100% backed by gold and silver, dollars lost none of their purchasing power. They represented something tangible, and were representative and convertible into gold or silver, just like a deed to a home, or title to a car, represents, secures, and can be converted into those items. Today, paper dollars of any denomination can be, and are printed with abandon, all at the same cost of less than a penny each, are backed by nothing, represent nothing, and are merely "legal tender." Through clever methods used by the Federal Reserve, banks, and Treasury, the currency supply is increasing astronomically. Not just increases in physical paper dollars, which are a tiny fraction of the currency supply, but with bonds, credit, ledger entries, loans, and other devices. All such devices combined, are used to determine the currency supply statistics (M1, M2, & M3), and which supplies increase daily. The prices in paper dollars of gold and silver are at manipulated lows, and the currency supply is zooming up. Ever quicker increases in currency supplies, like now, and in war times, have been characteristic in every single governmental debasement and bankruptcy in history. What better thing is there to do with paper dollars, than to convert them into something tangible, compact, fungible, historically valuable, and beautiful? Especially when metals are poised to increase in paper dollar prices, and the paper dollars are fast decreasing in purchasing power? Know of anything else with those characteristics, and which can be anonymously bought, sold, and owned? I don't!

Fed has done all it can to fix US economy's non-structural issues, now it must hike rates