Why Are People Buying Silver And Gold?
By Jason Hommel
Many people today are cashing out their CD's to buy silver and gold. Why?
The CD's 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. Since silver is 1/2 the weight, a similar sized silver coin, gold plated, would be about 1/4 of the weight of a gold coin!
Thus, the brass or copper core, gold plated, "authentic replicas" as sold 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.
I asked several bullion dealing managers why people are buying precious metals:
Matt, at our coin shop says,
"Now more than ever, it seems that people are becoming increasingly aware of the growing instability of the dollar. With the national debt climbing, and the future of our nation's currency looking less bright every day, people are looking for ways to protect their wealth against inflation and the ever-crumbling banking system. After doing some research, most of them come to realize that purchasing precious metals like silver and gold is the most reliable method for storing their wealth in a way that will ensure that their hard-earned capital will retain its spending power and viability despite an economy with a future that is shoddy, at best."
Jim, at the coin shop, says:
"When most people think of precious metals, they think "gold." So when they consider purchasing precious metals, gold is the first thing on their minds, because they automatically associate it with something valuable. It's a cultural phenomenon that is ingrained into our everyday lives. Gold Record for recording artists. Gold Medals for Olympic champions. Everyday phrases like, "That guy is as good as gold," or "this is a golden opportunity." It's human nature."
K, at the Mint says:
"Most of our customers are buying gold or silver because they all know the government is going down the tidy bowl! Most of them choose to buy from us because of our growing reputation, they read me online, or they hear about us from family or friends, and they are hearing all of the horror stories about other bullion dealers on the internet not being able to deliver, or just taking forever. "
Dave, also at the Mint says:
"People are just cashing in their CD's because they know they will get a better return in silver and gold."