In Jim Cook's Archive

By James R. Cook

A customer has asked me to comment on an announcement by a major competitor that they will no longer maintain an inventory of gold or solicit gold sales. This company claims gold is no longer a hedge against inflation or devaluation and is not a store of value. They argue that gold is no longer insurance against an economic, monetary or political crisis. They claim the price of gold will fall and they urge people to sell their gold. Apparently this company intends to concentrate their marketing and sales on rare coins.

Nobody knows what gold will do in a crisis because we haven’t had a real economic crisis since 1930. Gold rose in 1980 because of inflation. And there’s plenty of evidence to suggest gold will go up if the dollar falls. But the one thing that will really drive up the price of gold is fear. I mean the kind of fear that comes from plummeting stock values and zero liquidity. In that kind of crisis there are no buyers for your rare coins and your real estate. The price drops for an asset the moment it comes up for sale. Nothing causes fear like illiquidity. That’s when you want to have gold. It’s apparent that we have a completely different take on what can happen to the economy than does our competitor.

We suspect we are on the verge of an economic cataclysm. The magnitude of this crisis will likely be the worst in history. This is hardly an establishment view. If you adopt the mainstream Wall Street outlook, then there is no need for gold. Unfortunately, there have always been panics and crashes and there have always been moments when investors have been gripped by fear. That’s why we advocate that ten percent of your assets be put into gold or silver. In reality, you don’t want gold to go up dramatically because if it does, there’s disaster afoot. Nobody wants a panic. However, the simple fact is that no nation has ever committed the economic transgressions that we have and not paid a terrible price. My friend, Kurt Richebacher, puts it well. “The economic imbalances that have built up in the U.S. economy during the past four to five boom years are the worst in history: an insane credit explosion, grossly overvalued equities, near-zero personal savings, a monstrous trade deficit, steeply rising trillions of foreign debts, a hugely overvalued dollar, badly weakened corporate balance sheets, the lowest corporate profitability in the whole postwar period and a financial system that is founded on the most fantastic leverage.”

These are facts that economists and Wall Streeters like to overlook. They are nevertheless real and, as Dr. Richebacher puts it, both shocking and frightening. To not own gold or to sell gold at this moment in the economic cycle would be ill advised and extreme folly. I have no particular bone to pick with this company who now disparages gold. I know, and like, their chief executive. However, I have been asked to respond and I am doing so in hope of dissuading anyone who may be contemplating selling their gold. You only have to look at the economic news these days to see that I may be right.


Which is better, gold or silver? We’ve always been strong advocates for gold and to a lesser extent silver. But, according to silver analyst, Ted Butler, there’s no compare. Demand for silver by industry far outstrips demand for gold. Ted claims that most of the silver ever mined is used up and gone while the gold is still with us. He thinks the percentage gains in silver will be much higher than for gold.

However, gold has always been the premier monetary metal and that’s not going to change. There needs to be a lot of gold in the world for the yellow metal to be an alternative to paper money. You own gold to hedge against the loss of value of your dollar-denominated assets, including the currency itself. Owning gold is a conservative, prudent step. Gold is nature’s money. If and when the world’s monetary authorities make a complete shambles out of the government’s paper money, gold will replace it.

Not too many people buy into our theory that a credit collapse and economic earthquake are inevitable. You might suspect it’s possible, but down deep you think it’s a remote chance. In that case, silver offers you the best of both worlds. It’s not far behind gold as a monetary metal and if Ted Butler is right, it offers the potential for huge gains.

Is Ted Butler right? I don’t know, but I’ll tell you this. He brings a monk-like discipline (almost fanaticism) to the study of silver. He’s been eating, breathing and sleeping silver every day for fifteen years. Furthermore, he seems to know everything about it. He scotches inaccurate rumors, senses what the major players are up to, disdains undisciplined opinions, makes accurate predictions on short-term price movements and holds an encyclopedic knowledge of silver facts. He also has a sense of what’s going on that isn’t published or known. I’ve yet to find him wanting and I have challenged him plenty. He’s opinionated and he takes no prisoners. A few times I’ve wanted to strangle him, but I don’t hesitate to pay him a substantial monthly consulting fee and rely on his advice. When he says silver has to explode upward in price, you have to give that viewpoint a lot of credibility. Hands down, says Ted Butler, you can make a much greater percentage gain with silver than with any other precious metal.


            Ted Butler gave us a silver market update minutes before this newsletter went to the printer. He explained that in early January several large firms sold short over 200,000,000 ounces of silver and stopped the price rise in silver. Without their actions the price would now be much higher. Commodities law prohibits price manipulation. So when a few banking and brokerage companies sell on paper the equivalent of one-third of an entire year’s mining production in only a few days it dramatically impacts the price of silver. Ted Butler seems correct to cry foul.

After all, if somebody sold one-third of the world’s oil production or corn or coffee, it would create a buzz. The Hunt Brothers bought a lot of silver on paper and were nearly imprisoned. Mr. Butler will be contacting the Federal Commodities Trading Commission again and urge them to enact position limits for silver and stop the manipulation.

In the meantime, the high lease rates tell us that physical silver was in short supply. Sooner or later a silver shortage will overpower all other factors. For now, we know the price should be higher. Everyone has another chance to buy silver at prices that are much too low because of the tremendous sale of paper silver. That activity is absolutely contrary to the purpose of trading on the commodities exchange, which is to aid both the users and producers of silver.

We can see the recent price action as a setback or an opportunity. One thing for certain, buying silver now when you know that it should be higher is a logical step.


Some people prefer silver bars to coins. We advocate the following types of bars:

10 Ounce. These bars are portable and are more attractive than the bigger bars. Some have a reflective mirror image or a flag design. It makes good sense to have a few hundred ounces of these 10-ounce bars on hand.

100 Ounce. This is the mainstay of the various bar sizes. Each bar weighs over eight troy pounds. There are numerous refineries that have made these bars in the past and we still have them made today. The bars are .999 pure silver ingots. We ship them in plastic buckets, five bars to a bucket. You know you’re getting a lot of precious metal for the money when you hold one or two of these bars in your hands. You should buy at least ten or twenty of these silver bars and a hundred bars if you can afford it. They’re liquid, easily traded and widely coveted. We’ll buy them back when you wish to sell.


1000 Ounce. These big unwieldy bars weigh over 80 troy pounds each. They’re too heavy to be shipped through normal means so we recommend their ownership for storage. Most of these big bars that we sell are stored at the former Republic Bank in New York . They’ve been storing silver for us for three decades without a problem. Thousand-ounce bars are a good way to own silver at a slightly better price.

For those who prefer silver coins, we advocate uncirculated bags of Kennedy Half Dollars, Washington Quarters or Roosevelt Dimes. These coins are dated prior to 1965. They are all in beautiful, brilliant uncirculated condition. Each $1,000 face value bag contains 725 ounces of silver. A few of them are still in original bank rolls. We never have more than a few bags available and most often we’re sold out. However, if you tell your broker you are interested, you can get them when they become available.

Call us today at 1-800-328-1860 and buy silver. Only a small handful of Americans can own any quantity of silver. There isn’t enough for a lot of people or for large institutional buyers. When you own silver you are practicing one of the time-tested rules of success in money management. You are going against the herd mentality. This has always been an ingredient for making big money. Call us now. We’ll be happy to answer any question you might have.

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