Why Are People Buying Silver and Gold?
Source: Jason Hommel, Silver Stock Report/i> (5/5/10)
Many people today are cashing out their CDs to buy silver and gold. Why?
The CDs pay next to zero interest, and gold and silver continue to head up by 20%–30% per year.
Most of our gold and silver buying customers have completely lost faith in the government's ability to "run" the economy, but more than that, there is a real fear of the government today, that it will turn dramatically totalitarian and that we will lose nearly all of our freedom.
The best time to own gold is when the government starts taking more of your money. Silver and gold ownership prevents government from confiscating your wealth through inflation, and more and more people see the inflationary threat of massive $2+ trillion deficits, which are being met by printing more money.
A typical first time customer comes into our coin shop at the JH MINT, and says, "Hey this place looks really nice!" We designed it to look a bit upscale, with plenty of room to hang out, with nice couches to be able to sit down to talk.
They typically say, I've been doing a bit of research online about silver and gold, but I really know nothing about silver and gold, so what can you tell me?
To answer in person, I must get to the point quickly, as other customers will soon come in next.
So I like to show them, and let them hold a gold coin, and let them compare the heft and weight compared with a silver coin. Gold is twice as dense as silver, and the difference is easily discerned when you hold them. A 1 oz. gold coin is just a tad thicker than a half-ounce silver coin, which is a bit thinner, and much, much lighter. Because silver is half the weight, a similar-sized silver coin, gold plated, would be about a quarter of the weight of a gold coin!
Thus, the brass or copper core, gold plated, "authentic replicas" as old on TV make a beautiful comparison to show how difficult it is to counterfeit gold.
So when they hold gold, they know it's something real, and real special.
People continue to ask, "Which is better, silver or gold?"
I tell people, we like silver best, because it's a much smaller market. World annual silver mining is about $10 billion, but world annual gold mining is about $80 billion.
But most of the silver market is consumed by industry, as silver is used in all sorts of electrical contacts and devices. In fact, industry consumes more silver than world annual mine supply, and the gap is being met by recycling.
So the amount of silver left over for investors is shockingly small, perhaps only $2 billion.
The silver story is surprisingly simple. The entire world once used silver as money; but today, no nation on earth has silver circulating as currency. This reduced monetary demand has created a very low price.
But silver remains a better store of wealth than ever, due to the increased scarcity, and the growing awareness of silver ownership as a way to make money.
Money is more than a currency or medium of exchange, it's also a store of value. As demand for silver, as a store of value, increases, so will the price, and this demand will continue as a positive feedback loop that will eventually destroy paper money.
But the real shocking fact of the silver market is that 99% of silver investors are getting scammed by paper silver that is basically all fraud.
The proof of this is the BIS report, from the Bank of International Settlements, here.
The proof is in the numbers. The BIS keeps track of the derivatives of the banks worldwide. It shows that the notional value of "other precious metals" over the counter derivatives, which are mostly all silver, increased from $100 billion to over $200 billion in six months.
When the entire annual physical silver investment market is only $2 billion, and when the paper silver investment market increased by $100 billion in six months, there is only one way that can happen. The paper must be all fraud.