Lawrence Williams, writing for mineweb.com, questions silver’s “tracking the price of gold.” He writes, “There is no longer any serious monetary element to silver . . .” In case Williams hasn’t noticed, there is no longer any serious monetary element to gold. No country backs its currency with gold; no currency has been convertible into gold since August 15, 1971 when President Richard Nixon closed the gold window.

Although the world’s nations (in many cases, those nations’ central banks) report their “gold holdings” to the IMF, they do not back their currencies with gold. In fact, under IMF rules, member countries cannot back their currencies with gold. Silver holdings are not reported at all to the IMF, but does that remove the “serious monetary element?” No, and here’s why.

Since time immemorial people have used silver as money, even more so than they have used gold. The Bible mentions silver more times than gold, and in more recent times silver was used as money in the United States for 32 years after Roosevelt required Americans to turn in their gold coins for paper money.

Although gold and silver officially have been “demonetized,” does that mean gold and silver are not money to the people? We do not think so.

Our experience suggests the only reason more money is invested in gold is that silver is much more difficult to handle and secure. Silver investors get fifty times the weight and more than fifty times the volume (because gold is more dense than silver). But, will “the masses” prefer gold to silver when they become precious metals buyers?

For the sake of argument, let’s say that “silver continues to track gold” and both double in price, putting gold at about $1375 and silver at $27. Then let’s say “the masses wake up” and see the need to own gold or silver. By the hundreds of thousands, they convert their $10,000 or $20,000 or $40,000 in savings to gold or silver. Which will they choose, gold or silver?

Let’s go with the $20,000 investor. At $1375 gold, he could get about fourteen 1-oz Krugerrands. However, if he chooses silver, he could get about 700 ounces of silver (Premiums guesstimated). Our experience causes us to believe that the masses will buy much more silver than gold simply because they will get much more metal for the money.

And, here’s the really important point: in the aggregate the masses have much more money than the wealthy because the masses comprise the bulk of society. We think buying by the masses will cause the price of silver to outstrip the price of gold. (This is not a prediction that the masses will wake up when gold hits $1375 or silver hits $27. We are making no predictions as to when the masses will become gold and silver buyers, only that they will before this precious metals’ bull-run is over.)

Additionally, Williams says that he is worried “that a huge number of new producers seem to be able to bring new silver production on stream extremely quickly.” In other words, he is worried that future production may increase more than demand, causing a surplus of silver. He appears to have overlooked the great 1970s precious metals’ bull market.

During that run, the price of silver rose many times more than the price of gold while literally billions of ounces of silver lay in warehouses around the world. Today, those warehouses claim to hold only a few hundred million ounces, and some of those claims are questioned by many analysts. Yet Williams is worried about silver not yet mined holding back the price of silver while billions of ounces in warehouses in the 1970s could not contain silver’s meteoric price rise.

For the buyers who can handle silver’s bulk and weight, we recommend it.

According to a Department of Justice press release, a federal grand jury in Washington, D.C. has indicted two companies operating a digital currency business and their owners on “charges of money laundering, conspiracy, and operating an unlicensed money transmitting business.”

The indictment of the two companies is not a condemnation of all digital-gold companies, but it is evidence that the federal government is aware of digital-gold transactions, despite them being miniscule in world business.

Gold Fields Minerals Services (GFMS) is considered my many gold followers to be “the” authority on gold, and GFMS currently believes that gold production will increase slightly this year. However, Graham Birch, head of Black Rock Investment Managers, which administers the Merrill Lynch Gold and General Fund, disagrees. Birch notes that gold production has fallen for the last five years and is likely to fall again in 2007.

Birch, speaking at a gold luncheon in Zurich, also noted that the four historic gold producing leaders, South Africa, the US, Canada, and Australia, all lost production in recent years. Between 2000 and 2006, South Africa’s production fell 36%; combined, Canada’s and the US’s production declined 30%; Australia’s by 18%.

Martin Murenbeeld, a seasoned gold market analyst, spoke a breakfast presentation at the same event. He pointed out that his financial model, which has been remarkably accurate in recent years, also showed a continuing decline in world gold output. For years, Murenbeeld has said that gold low prices in 1990s would result in low gold produciton in future years.

Note that this analysis is about the production of physical gold. Not talked about is the explosion in paper money, primarily dollars, by which the value of gold is measured. Decreased production and increased purchasing medium should result in much higher gold prices. The stage is set for a classic precious metals bull market.

Resourceinvestor.com says that 42 persons are now involved in a class action lawsuit against a conglomerate of gold coin telemarketers from Beaumont, Texas. The plaintiffs are now asking for $1 billion in damages. The outcome will be interesting, to say the least.

For decades, telemarketers have promoted real, but sometimes purported, numismatic and collectible coins to investors. Often, the coins are priced well above the market. We have talked to investors who have paid double the value of the coins that they purchased.

Some telemarketers openly disclose that they are marking up their coins 30%. Sadly, many investors are so unsophisticated that they do not know that 30% markups are unreasonable. Other telemarketers conceal the actual value of the coins, often comparing the prices of the coins they sell with prices in the late 1980s when the market was vastly different.

Still more sadly, many buyers fall for sales pitches that assert certain coins are “non-confiscatable.” As our expose Myths, Misunderstandings, and Outright Lies explains, there is no such thing as a “non-confiscatable” coin. Investors who have not read our Myths, Misunderstandings, and Outright Lies are urged to do so.

In our March 27 article about the Perth Mint closing its hugely successful Lunar Series, we failed to cover what the Perth Mint is going to do about the three silver Lunar years not minted: the Rat, the Ox, and the Tiger.

To bring everyone up to speed, the Mint began production of the gold Lunar Series coins in 1996 with the year of the Rat , but did not produce silver Lunar Series coins until 1999, with the year of the Rabbit. Since the Mint is taking final orders for the Series on June 30, unless it mints those three years in 2008, 2009, and 2010, collectors of the silver Lunar Series coins will not be able to complete their Series. Frankly, I think it would be major misstep of the Perth Mint failed to provide collectors of the silver Lunar Sires coins with coins of all the same design and dimensions.

The Mint has informed us (and as explained in the article) that for 2008 Rat (Mouse to some), which starts the next 12-year cycle of the Lunar Calendar, they will change drastically the look of the Lunar coins so that the first series coins will not be confused with the second series. When we find out what the Mint plans to do about the missing three silver Lunar Series coins, we will post here.

Although we sold quite a few silver Lunar Series coins, we never recommended them because of their high premiums, which make them collector items, not investment items.