Nominee for SEC chairman owns gold shares

Section:

By Theodore Butler
InvestmentRarities.com
Tuesday, July 12, 2005

Here's a recent e-mail exchange between a reader and myself. It was
in reaction to some of my recent articles asserting that gold is
more abundant than silver.

Question: Are you saying that silver is rarer than gold in absolute
terms? Iunderstand that, in terms of silver in the ground and the
rate ofuse, in some sort of relative terms silver israrer
than gold. But you seem to be saying that in absoluteterms silver
bullion is rarerthan gold bullion. Do I understand you correctly?
It seems impossible that silver, an industrial as well as a precious
metal, would be rarer than gold in absolute terms and yet cost only
1/60th as much. Has the silver manipulation actually distorted
prices to this degree? I am sure others are as confused as I am
about this. It does not seem to make sense. Was there a tyop in your
article? Or have I made some horrendous error in my math? (That is
quite possible.)

Answer: Yes, that is exactly what I am saying and have been
sayingall along. The very first article I wrote for Investment
Rarities in November 2000 had that issue as the central point.

I understated the real figures in the article because I was talking
about known silver bullion vs. known gold bullion. Bottom line:
There is three to five times as much gold in the world than silver
on a physical ounce by ounce basis,so silver is much rarer than
gold. But when you put a dollar amount on it, the relationship goes
through the roof. In dollar terms gold is 200 to 300 times greater
in value than silver. I've written many articles on this, so perhaps
I wasn't clear enough and will try harder in the future. In simple
terms, anyone who owns gold in lieu of silver needs to have his head
examined.

* * *

I would like to expand on this theme a bit -- namely, why I feel
that silver is a much better holding than gold.

Let me assure you that I approach this controversial issue with
constructive intentions. The last thing I want to do is to insult my
gold friends. I harbor the best of intentions toward them by
suggesting that they move some of their gold into silver.

First, I believe that one's capital will grow more in silver than it
will in gold. I think there are many advisers who believe this yet
are hesitant to say so for fear of offending gold investors.
Instead, they say you should hold both gold and silver. I disagree
with that. Gold and silver are not one and the same, and it is
reasonable to assume that they will have different performance
results in the future. Analysts should be clear in their
expectations for either.

Second, because we have not witnessed any tremendous price
performance difference in the past few years between gold and
silver, gold investors haven't missed the boat yet by not
switching to silver. In other words, because gold and silver prices
have generally climbed by the same amount since I have been writing
these reports, there hasn't been much gained or lost by being over
weighted in one or the other. That will change dramatically, in my
opinion, in favor of silver. But for now, gold investors can still
get just as much silver for their gold as they could when silver was
$4. That's a great opportunity.

Third, by making the switch from gold to silver, gold investors may
actually help to boost the price of gold. That's because even the
smallest flow of gold money into silver would set the price of
silver flying, which, in turn, should impact the price of gold. As I
have written before, the value of half of 1 percent of the world's
gold comes to an amount greater than 100 percent of the value of all
the silver in the world. Those numbers are so profound that they may
be difficult to comprehend. Once you understand them, you may not
hesitate to switch gold into silver.

Although I have been writing of the rarity of silver compared to
gold for years now, the numbers in total dollar terms are so
staggering that you can't grasp the enormity of it.

That's what I think happened to my e-mail friend above. How can an
item so rare be worth such a small fraction of the more plentiful
item? There is nothing in your life's experience to reconcile this
with. This is new stuff. Your only hope of grasping it is to go
someplace quiet with a pencil and paper and play with the numbers.

There are 4 to 5 billion ounces of gold in the world (according to
the World Gold Council and others) but only half a billion to a
billion ounces of silver (according to the Silver Institute and
others). You know the current prices. Do the calculations. Here's
what you'll find. There is more than $2 trillion worth of gold in
the world. That's $2,000 billion. The amount of gold increases
daily, at current prices, as new gold is added to inventory. There
is no more than $7 billion worth of silver in the world, at current
prices, and every day there is less silver in the world, due to the
deficit.

One half of 1 percent of $2 trillion is $10 billion. So the total
dollar value of all the silver in the world is less than half of 1
percent of the total dollar value of all the gold in the world. If
silver were to triple in price and gold's price remained unchanged,
the silver would still be worth only 1 percent of gold's total
value. On a per-capita basis, there is more than $300 worth of gold
for each of the 6 billion people in the world, versus little more
than $1 in silver.

You have been taught, and know intuitively, that something more rare
than something else must be more expensive. That is not the case
with gold and silver. In addition, the substance more rare is a
vital necessity in modern life, while the more plentiful item is
basically a luxury. That the rarer, needed and disappearing material
is priced incorrectly is what presents the opportunity of a lifetime.

Either these numbers and my thinking are wrong, or the price of
silver is wrong. If you think I am right, then the trick, of course,
is to absorb that knowledge and act on it before the masses catch
on. I can tell you that very few people realize that silver is rarer
than gold, or that all the silver in the world is worth less than
one half of one percent of the world's gold. Certainly, I would
never publish numbers or facts that I knew to be incorrect. But it
is up to you to verify my calculations and assertions. If you take
the time to do the math, I think you will be compelled to buy silver.

----------------------------------------------------

To subscribe to GATA's dispatches, send an e-mail to:

gata-subscribe@yahoogroups.com

To unsubscribe, send an e-mail to:

gata-unsubscribe@yahoogroups.com

----------------------------------------------------

RECOMMENDED INTERNET SITES
FOR DAILY MONITORING OF GOLD
AND PRECIOUS METALS
NEWS AND ANALYSIS

Free sites:

http://www.jsmineset.com

http://www.cbs.marketwatch.com

http://www.mineweb.com/

http://www.gold-eagle.com/

http://www.kitco.com/

http://www.usagold.com/

http://www.usagold.com/amk/usagoldmarketupdate.html

http://www.GoldSeek.com/

http://www.GoldReview.com/

http://www.capitalupdates.com/

http://www.DailyReckoning.com

http://www.goldenbar.com/

http://www.silver-investor.com

http://www.thebulliondesk.com/

http://www.sharelynx.com/

http://www.mininglife.com/

http://www.financialsense.com

http://www.goldensextant.com

http://www.goldismoney.info/index.html

http://www.howestreet.com

http://www.depression2.tv

http://www.moneyfiles.org/

http://www.howestreet.com

http://www.minersmanual.com/minernews.html

http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.html

http://www.goldcolony.com

http://www.miningstocks.com

http://www.mineralstox.com

http://www.freemarketnews.com

http://www.321gold.com

http://www.SilverSeek.com

http://www.investmentrarities.com

http://www.kereport.com
(Korelin Business Report -- audio)

http://www.plata.com.mx/plata/home.htm
(In Spanish)
http://www.plata.com.mx/plata/plata/english.htm
(In English)

http://www.resourceinvestor.com

http://www.miningmx.com

http://www.prudentbear.com

http://www.dollarcollapse.com

http://www.kitcocasey.com

http://000999.forumactif.com/

http://www.golddrivers.com/

http://www.goldpennystocks.com/

Subscription sites:

http://www.lemetropolecafe.com/

http://www.goldinsider.com/

http://www.hsletter.com

http://www.interventionalanalysis.com

http://www.investmentindicators.com/

Eagle Ranch discussion site:

http://os2eagle.net/checksum.htm

Ted Butler silver commentary archive:

http://www.investmentrarities.com/

----------------------------------------------------

COIN AND PRECIOUS METALS DEALERS
WHO HAVE SUPPORTED GATA
AND BEEN RECOMMENDED
BY OUR MEMBERS

Blanchard & Co. Inc.
909 Poydras St., Suite 1900
New Orleans, Louisiana 70112
888-413-4653
http://www.blanchardonline.com

Centennial Precious Metals
3033 East First Ave., Suite 807
Denver, Colorado 80206
1-800-869-5115
http://www.USAGOLD.com
Michael Kosares, Proprietor
cpm@usagold.com

Colorado Gold
222 South 5th St.
Montrose, Colorado 81401
http://www.ColoradoGold.com
Don Stott, Proprietor
1-888-786-8822
Gold@gwe.net

El Dorado Discount Gold
Box 11296
Glendale, Arizona 85316
http://www.eldoradogold.net
Harvey Gordin, President
Office: 623-434-3322
Mobile: 602-228-8203
harvey@eldoradogold.net

Gold & Silver Investments Ltd.
Mespil House
37 Adelaide Rd
Dublin 2
Ireland
+353 1 2315260/6
Fax: +353 1 2315202
http://www.goldinvestments.org
info@gold.ie

Investment Rarities Inc.
7850 Metro Parkway
Minneapolis, Minnesota 55425
http://www.gloomdoom.com
Greg Westgaard, Sales Manager
1-800-328-1860, Ext. 8889
gwestgaard@investmentrarities.com

Kitco
178 West Service Road
Champlain, N.Y. 12919
Toll Free:1-877-775-4826
Fax: 518-298-3457
and
620 Cathcart, Suite 900
Montreal, Quebec H3B 1M1
Canada
Toll-free:1-800-363-7053
Fax: 514-875-6484
http://www.kitco.com

Lee Certified Coins
P.O. Box 1045
454 Daniel Webster Highway
Merrimack, New Hampshire 03054
http://www.certifiedcoins.com
Ed Lee, Proprietor
1-800-835-6000
leecoins@aol.com

Lone Star Silver Exchange
1702 S. Highway 121
Suite 607-111
Lewisville, Texas 75067
214-632-8869
http://www.discountsilverclub.com

Miles Franklin Ltd.
3015 Ottawa Ave. South
St. Louis Park, Minn. 55416
1-800-822-8080 / 952-929-1129
fax: 952-925-0143
http://www.milesfranklin.com
Contacts: David Schectman,
Andy Schectman, and Bob Sichel

Missouri Coin Co.
11742 Manchester Road
St. Louis, MO 63131-4614
info@mocoin.com
314-965-9797
1-800-280-9797
http://www.mocoin.com

Resource Consultants Inc.
6139 South Rural Road
Suite 103
Tempe, Arizona 85283-2929
Pat Gorman, Proprietor
1-800-494-4149, 480-820-5877
Metalguys@aol.com

Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
http://www.swissamerica.com
Dr. Fred I. Goldstein, Senior Broker
1-800-BUY-COIN
FiGoldstein@swissamerica.com

The Moneychanger
Box 178
Westpoint, Tennessee 38486
http://www.the-moneychanger.com
Franklin Sanders
1-888-218-9226, 931-766-6066

----------------------------------------------------

HOW TO HELP GATA

If you benefit from GATA's dispatches, please
consider making a financial contribution to
GATA. We welcome contributions as follows.

By check:

Gold Anti-Trust Action Committee Inc.
c/o Chris Powell, Secretary/Treasurer
7 Villa Louisa Road
Manchester, CT 06043-7541
USA

By credit card (MasterCard, Visa, and
Discover) over the Internet:

http://www.gata.org/creditcard.html

By GoldMoney:

http://www.GoldMoney.com
Gold Anti-Trust Action Committee Inc.
Holding number 50-08-58-L

Donors of $1,000 or more will, upon request,
be sent a print of Alain Despert's colorful
painting symbolizing our cause, titled GATA.

Donors of $200 or more will receive copies
of "The ABCs of Gold Investing" by Michael
Kosares, proprietor of Centennial Precious
Metals in Denver, Colorado, and "The Coming
Collapse of the Dollar" by James Turk and
John Rubino.

GATA is a civil rights and educational
organization under the U.S. Internal Revenue
Code and contributions to it are tax-deductible
in the United States.