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Why Silver Is a Poorer Investment Than Gold, and Both Are Better Than Dollars: A Free Report for Newcomers

Gary North

Nov. 14, 2009

There is an old saying: "Silver is the poor man's gold."

There is another old saying: "If you want to get rich and stay rich, own what rich people want to own."

Buy gold. It is the better investment of the two.

The charts tell all.

The winner, 2000-2009:

The loser, 2000-2009:

These are objective facts. If you had invested in gold bullion rather than silver bullion in 2000, you would have a higher net worth. Gold was at $282 on January 4, 2000. It is at $1100. It is up by a factor of 3.9. Silver began at $5.30 on January 4, 2000 and is at $17.50. It is up by a factor of 3.3.

Silver has yet to reach its peak of March 2008. Gold has exceeded its peak. Silver peaked at $20.80 on March 6, 2008. It fell to $8.88 on October 24, 2008. That is a loss of 57%. Gold peaked at $1,011.25 on March 17, 2008, and fell to $712.50 on October 24, 2008 -- the same day that silver bottomed. That is a loss of 29.5%.

I warned my readers on March 18 that gold was about to fall. You can read my report here:

Beware of silver promoters who offer reams of statistics and who then tell you that silver is a better long-term investment than gold. The charts indicate otherwise.

If the statistics really do convey useful information, silver bulls should have told their readers no later than mid-March, 2008, to begin to sell off portions of their positions as the price moved lower, or else short the market to protect their positions. That is what I told my readers to do with gold on March 17.

But none of them saw it coming. Their statistics were utterly useless when it mattered. They still are. They are merely noise -- and sales tools.

On March 7, 2008, the day after silver peaked at $20.80, I warned my readers of the looming fall in commodity prices, due to the recession.

I did not need reams of statistics to tell me that. I needed only Austrian economic theory and a few charts, which I post for free on this site: Feferal Reserve Charts.

So, when a silver bull hits you with all those statistics, think this: "He did not warn his readers that a crash was coming."

I presented the case for gold vs. silver in early 2006. You can read my arguments here:

My arguments have not changed.

Here is the main one: Central banks own gold and buy gold. They do not own silver or buy silver. Gold therefore has more demand in a recession than silver does. Silver's price is more volatile. It is therefore more risky.

This is so obvious that anyone except a professional silver bull can see it (charts) and understand it (analysis). Professional silver bulls have built their mailing lists on one theme and dare not admit what economic analysis (central bank purchases) and historical evidence (the charts) reveal. They sing the old songs to clients who want to hear them.

I am writing this for people who are not anyone's client yet, people who have not yet bought gold or silver.

When you hear the sales pitch of a silver bull, expect to be inundated with facts: prices, supplies, etc. Here is the problem: these facts have not led to a correct conclusion, namely, that gold has been a better investment. The piles of facts about present supply and future demand are noise; reality is in the price charts.

The silver bulls' main argument has not changed since Jerome Smith began pitching silver in 1967. There was a shortage of silver, he said. He kept saying it in the 1970s. He kept saying it in the 1980s, years after silver had collapsed. He was wrong. If there was a shortage of silver, why did the price fall from $54 (for one day) in January of 1980 to $4 in 1992 -- the biggest decline of a commodity price in the late 20th century?

What drove up silver after 1975 was Bunker Hunt, who used the futures market to buy it and then started taking delivery. The COMEX changed the rules in late 1979, about the time that the Federal Reserve System slowed the expansion of money. Hunt went bankrupt. You can read about the ill-fated venture here. Silver has never approached its 1980 high. It peaked at $54 in 1980. It peaked at $20.80 in March 2008. That is 38% of the high. But the overall cost of living was up by 160%.

Silver shortage? Give me a break!

When the same argument repeated endlessly for over 40 years is accompanied by wild price swings upward and downward, you can safely ignore the argument. Any parrot can be trained to repeat, "Silver shortage. Silver shortage." Long John Silver's parrot kept repeating, "Pieces of eight." Pieces of eight were silver coins. I would have trusted the parrot more if he had kept saying, "British gold sovereigns." But Long John Gold doesn't have the same ring to it.

If you go searching for a treasure chest, hope that it is filled with gold, not silver.

There is no shortage of silver. Here is my report on this from September 2008.

I suggest that you stop worrying about any shortage of silver. Silver moves parallel to gold, but it is far more volatile.

If you remember the Warner Brothers cartoons featuring Spike the bulldog and the little terrier, Chester, you can better identify gold and silver.

Spike lumbered along. Chester jumped up and down and kept saying, "We're gonna get 'em, aren't we Spike?" Gold is Spike. Silver is Chester.

Gold is easy to store. You can move a lot of value in a small box. Silver coins are heavy. They are a hassle to mail. They are a hassle to move.

Buy gold for a major social crisis. Buy silver as an investment if you have bought $10,000+ in gold coins, but limit it to 20% of your gold.

Honor Blumert's law: "Buy the best. Pay cash. Take delivery."

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For the record, I am an old timer in the precious metals markets. I bought my first silver coins at a local bank at face value in the summer of 1963. They began going out of circulation in the fall of 1963. The laminated silverish coins replaced silver coins in 1964.

I wrote my first booklet on money in 1964: Inflation: The Economics of Addiction.

I attended the first-ever gold investment conference in 1967. It was sponsored by Harry Schultz.

I was a salesman for gold and silver coins for Monex in 1973.

I served as Ron Paul's research assistant in 1976.

I have written a book on gold, The Gold Wars. You can download it here:

This site has a free department on gold. Visit it here:

I have been there and done that. I have also heard that. I have seen the results. My conclusions: (1) Buy more gold than silver: 80%-20%, but no silver until you have bought $10,000 in bullion gold coins issued by the mint of the nation you live in. (2) Buy the best. (3) Pay cash. (4) Take delivery.

Or you can listen to the newcomers, who have all those statistics on the looming shortage of silver.

I say "tell it to Jerome Smith." If you can find him.

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