F.A.Q.

  Home


    
Click here to visit GoldSeek.com!

     Q: Why did you create this website?
     A: I've been studying and discussing the silver market for years and wanted to share what I've learned with others. Approach the ideas presented here with an open mind and use what I write as a guide to discovery and not a website containing definitive answers. I see minimal downside to owning physical silver (due to it's inability devalue to zero like the paper U.S. dollar), and potential wealth maintenance and possible gains in the coming years.

      Q: What is the difference between monetary inflation and price inflation?
    
A: Monetary inflation is the increase in the money supply relative to goods and services. Price inflation is the increase in prices of goods and services.

     Q: Does it matter in what form I purchase my silver? Is one form or another more desirable?
     A: I would generally want to receive as much silver as possible for my paper dollars. Therefore, you may ask to buy silver in 1 oz., 10 oz., 100 oz., or a bag ($1000 face value) pre-1965 U.S. dimes, quarters or half-dollars. The 55 pound bag of coins is known as "junk" silver and each coin contains 90% silver. Each bag holds 712-720 ounces of real silver, depending on the wear of the coins.
     The coins have a stamped value that has nothing to do with their silver content value. And the amount of silver in the coins is not equal to the overall weight of the coin as it is an alloy with other metals.
     Please make sure you are buying from a reputable dealer who has been in business for a long time. Rocky Mountain Coin has been in business for many years and are honest and reliable in my past dealings. CLICK HERE to see their excellent page of every type of silver you can buy. Or you may buy from flea markets, scrap metal dealers and in some cases even from small miners who have found some very rich pocket silver. I also like Miles Franklin in Wayzata, Minnesota. CLICK HERE for their website.


     Q: Isn't gold more valuable? Why should I buy silver instead?
     A: The saying is, "Smart money is buying gold. But the REALLY smart money is buying silver." Gold is certainly a good investment and it's certainly better than holding worthless (fiat) currency. For example, it's much easier for $18.00 silver to double in value than $1000 gold. If you wish, buy gold, platinum or palladium. They are all still precious metals and their value will never go to zero. However, keep in mind that Warren Buffet bought silver, not gold.

     Q: What is this 'fiat' currency your mention?
     A: Fiat currency is an arbitrary (fiat) process where banks make legal tender using laws created by politicians to enforce its use. It is said to have no intrinsic value because it takes little work to create it and because it is not linked to silver or gold reserves. There is no limit as to how much fiat currency can be created. As history has shown since the Roman Empire, it always inflates and becomes worthless over time.

     Q: Where should I store my physical precious metals?
     A: This is a personal preference. It is not advisable to store any precious metals on your property. If you must, multiple immovable safes bolted to the floor in various locations would be a good idea. I once heard of a woman storing her gold coins in a jar of peanut butter in her fridge. That would make one expensive peanut butter sandwich!

     Q: Should I invest in silver stocks instead of physical silver?
     A: Many in the industry suggest buying much physical silver (gold, platinum, palladium) wealth before investing in any silver mining stocks. However, given that 80 silver stocks were up 314% in 2003, stocks can be quite attractive to the investor, especially given that many in the silver mining industry are exploring and even restarting their mining operations in anticipation of an increase in silver prices. At current prices it's not entirely cost effective for them to bring silver to market. However it seems that they understand that silver prices may soon make their operations quite profitable.

     Q: Can you recommend some stock newsletters in the precious metals industry?
   
  A: Jason Hommel writes a weekly Email newsletter with in-depth silver mining company reviews and a look at his extensive portfolio. CLICK HERE for his FREE Silver Stock Report. Just remember that these types of investments can be volatile. Do your research and due diligence.

     Q: What is a private placement?
     A: private placement is a contract between an accredited investor and a company to buy a given number of shares at a given price, usually at well below the market price per share. A private placement is valuable because a) the investor is able to a large number of shares at a lower price b) buy large quantities without driving the share price up while purchasing and c) avoid large broker commissions.
     For example: OT Mining issued a private placement for USD $1.25/share when the stock was trading on the open market for $3.00/share. The minimum amount to invest was USD $25,000 with a 2 year hold time (time during which you cannot sell your shares).
     A hold time of 4 months, however, is more common. That hold time is only one of the few drawbacks. One other issue is that you also need to be an accredited investor to engage in private placements.

     Q: What is an accredited investor?
     A: Partial listing of the definition and it applies to individual readers is:
         1. a natural person who has individual net worth, or joint net worth with the personís spouse, that exceeds $1 million at the time of the purchase;
         2. a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year. CLICK HERE to read the U.S. government's definition.

     Q: What is a warrant?
     A: A warrant is an agreement between the investor and the company to issue more shares in the future, again at a reduced price. Often, a warrant is issued in conjunction with a private placement. The investor, however, can let the warrant expire without purchasing more shares.

     Q: What's this I hear about the price ratio of silver to gold?
     A: Historically silver has traded at a price ratio of 16:1 to gold, reflecting the relative ratios of silver to gold found in the earth. So this means that historically, it took 16 ounces of silver to buy one ounce of gold. Currently, if you scroll to the top of this page, you'll see the ratio calculated for you. One could assume that silver may increase in value to align more with historical price ratios.

     Q: I read that that the Federal Reserve is not a part of the U.S. Government.
     A: The Federal Reserve is an private international banking consortium which was formed in 1913 to issue paper currency to the population of the United States. Alan Greenspan, the previous Federal Reserve Chairman, usually spoke quite cryptically about the Fed intentions in what often appears to be a government  forum. This often leads to the misconception that the Federal Reserve is a government entity instead of a private bank. CLICK HERE to read an in-depth article about the Federal Reserve and John F. Kennedy.

     Q: Someone told me that in 1980 a $1000 face bag of 90% (junk) silver coins could buy a house.
     A: Yes and no. A bag of junk silver coins (about 720 ounces) could be sold for $30,000-$32,000 when an ounce of silver was valued at $45 / oz. Keep in mind the U.S. dollar has lost much more of it's value compared to 1980's dollars. Anyway, in some areas of the country you actually could have purchased a modest house for that price. I suspect that in the future, the price of silver will increase and the value of homes will decline.

     Q: Where has silver been coming from during the last 25 years?
     A: Almost all silver currently comes to market as a by-product of the mining of zinc, gold, etc. Without dedicated and active silver mining during the last 25 years, much of it comes from reclaimed silver jewelry and photographic and industrial recycling.

     Q: I don't understand why silver hasn't been directly mined for the last 25 years?
     A: Mining companies were not motivated to mine silver when they could sell it only for what it cost to retrieve from the ground. Now, however, countless silver companies are ramping up production and exploring in anticipation of much higher silver prices. CLICK HERE to get the free Silver Stock Report and read about various mining companies and their activities.

     Q: I read online that the U.S. Mint needs to buy silver on the open market to mint their silver eagles. Was this website correct?
     A: A few sources have reported that nearly all U.S. Government reserves, and other above ground silver reserves, have been depleted.

     Q: In the event of a financial panic, if the coin dealer suspected an awful financial mess why would this wise merchant want to sell more of his precious metals? Or, in the event of a cash-bank melt-down why would people want to sell their silver to the coin dealer?
     A: I would assume that during hard times a coin dealer would have a greater potential for profit if he did NOT give out paper currency in exchange for bullion. Besides, who would want paper if it's rapidly declining in value? His profit would likely be made in 'making change' for 100 oz bars, gold coins, etc. so people could purchase everyday items such as fuel and food.
     "Give me your 1 oz. gold coin and I'll give you 80% of its value in silver coins so you can walk around town without fear of losing too much in a robbery." I could possibly see conversations like that taking place.


     Q: How liquid is bulk silver and will a coin dealer buy it back from me?
     A: Your silver is likely easily convertible to cash. Almost any coin dealer will likely give you fiat currency in exchange so he can resell it to the next person who wants to buy. When purchasing and selling silver, be sure to deal with a reputable coin dealer who has been in business for a long time.


Rocky Mtn. Coin

Click here to visit GoldSeek.com!


     Q: I've read that investment demand (like from Warren Buffet) will drive up the price of silver more most rapidly. Is this true?
     A: Possibly. Recently many articles have attributed the increase in silver prices to the decline of the value of the U.S. Dollar. Once investment demand increases drastically, expect a rapid jump in silver prices. Due to the current bull market, after a 20 year bear market, demand recently has been far exceeding supply. It is sometimes difficult for dealers to even find silver buy to sell to customers.

     Q: I understand that Bill Gates owns a silver mine. Which one?
     A: He apparently owned 10% of Pan American Silver (symbol: PAAS)

     Q: I've read that a few mining companies went bankrupt during the last silver bull market.
     A: This is true. During any bull market companies go bankrupt. Sometimes even questionable companies become quite popular with investors. As the saying goes, "Buyer beware." Do your due diligence.

     Q: Since silver is used in photographic film, won't the increased use of digital photography decrease the industrial demand for silver?
     A: Doug Kanarowski writes an incredibly comprehensive article refuting this belief. CLICK HERE to read his thoughts.

     Q: What if the U.S. Government confiscates precious metals?
     A: Given the relative failure of the Gold Reserve Act of 1933, I doubt something similar would be tried again. Besides, the limited quantities of all other precious metals (silver, platinum, palladium, rhodium) would not be worth any governmental effort to confiscate them. Remember that banks and local governments can confiscate your house if you miss a few monthly payments. Which occurs more often in today's world? Regardless, silver would most likely not be included because it may be needed for currency.

     Q: Is a bank safety deposit box is the safest place to store my silver?
     A: First, silver is often too bulky to store in small safety deposit boxes. Second, as long as that bank would not go out of business, you would be able to retrieve it. If a bank fails (like the 1200 bankruptcies during the Great Depression), the contents of every safety deposit box is liable to confiscation. Gold coins are more easily stored in this manner due to their small size but are similarly vulnerable to banks opening the boxes and obtaining the contents.

     Q: How would a bank go BANKrupt?
     A: Banks engage in "fractional reserve banking." I believe they are required by the Federal Reserve to have cash reserves of a ratio of about 10:1. What could happen when too many customers demand their savings in cash? The Great Depression - Part 2, perhaps. Cars, and homes can't be sold easily to put food on the table. Silver can be traded for almost anything, with junk silver quarters, dimes and halves being the most liquid. Even stocks may be worth little and difficult to sell in chaotic financial times. Besides, how would you value a stock when the dollar collapses?

     Q: What is a Comex silver bar?
     A: I once heard the story of a guy who owned a 1000 oz. (62.5 lbs.) Comex silver bar. He used it as a door stop for years because nobody knew what it was, nor could they move it easily if they tried.

     Q: I once heard there are no capital gains taxes on precious metals. Is this true?
     A: It is recommended that you do your own research on the matter of capital gains and taxation in the country where you reside. Bullion and collectible coins may have different liabilities. Taxes, where required, should always be paid to the appropriate government agencies so consult a tax professional for the best advice.

     Q: I've asked my investment professional about silver and gold and he told me that it's not a good investment.
     A: In 1970 if I had told you that the price of gold would reach $850 / oz. by 1980, after trading at $35 / oz. since 1933, would you have believed it? Probably not. Many believe that the price can only increase due to supply and demand. Do your own research on this topic because the 'professionals' likely have not.

     Q: So investment demand will drive up the price of silver?
     A: Quite possibly. Recently the increase in silver prices has been mostly attributed to the decline of the value of the U.S. Dollar. Once investment demand increases, a rapid jump in silver prices is possible.

     Q: I understand that a silver dime was used to pay a day's wages. Is this true?
     A: There has been some debate about if it was a dime or a quarter. Regardless, this was before the Federal Reserve was given a license to print fiat currency at will. Currently a worker receives a paper check to deposit which can then be converted to paper currency. Wouldn't it be more beneficial for that man to receive something of real value, something of true wealth as a wage for a day's hard work?

     Q: How much value has the dollar lost?
     A: Since 1913 (the year of the Federal Reserve creation), the U.S. dollar has lost about 98% of it's value. Blame this on constant, unchecked printing of paper currency.

     Q: I heard that Federal Reserve Chairman, Alan Greenspan, indirectly 'punished' savers by lowering the interest rates.
     A: Sad but apparently true. Sure a house was easier to buy with lower interest rates, but many retired folks living off their 30 years of savings could do so no longer. So then why save when you can spend? With the U.S. economy previously reportedly based two-thirds on spending, it appears that Greenspan wanted to prop up this ailing economy. Another effect seems to have deluded the 'sheeple' into thinking the economy was improving. We now know that was not true.

     Q: Assuming I enjoy gains in my silver stock portfolio, when should I sell my stock?
     A: Historically in a bull market, mining stocks gain in value much faster than physical silver. When I think a stock has reached it's peak, I will likely sell the stock and purchase physical silver, gold or another undervalued mining stock. I would personally not sell stocks unless I intended to purchase a large ticket item in full.

     Q: How will I know when the silver bull market is over?
     A: I may want to start selling when too many cocktail party conversation turns to a discussion about silver, gold and mining company stocks. When it seems like everyone is an expert on the topic, like before the real estate meltdown, it may be time to sell.

     Q: I read that Warren Buffet purchased large amounts of silver in 1997. Why did he buy so much and why?
     A: It's known that Warren Buffet seeks excellent long term investments. From July 1997 to January of 1998, Berkshire Hathaway took delivery of 129.7 million ounces of physical silver. During this period of accumulation the price moved from around $4.50 to $7.00 / oz. Shortly thereafter, the price of silver fell back to $5.00 / oz.
     If one investor in 1997 caused the price of silver to increase in value so dramatically, imagine the potential price gains a few large investors (or countless small investors) could cause. Rumors at the time were that Mr. Buffet was actually prevented from buying more silver when the U.S. government demanded that he halt further silver purchases. CLICK HERE to read the press release regarding the Berkshire Hathaway silver purchase.
     Some experts believe that Mr. Buffet has since sold all of his silver reserves, which may have helped make the silver price artificially low.

     Q: I've read that platinum and palladium once cost the same in U.S. dollars.
     A: This is true. Currently, platinum is worth far more than palladium... and even gold.