Tom Cloud: Silver is the Hot Thing Now

By: John Rubino | Thu, Sep 27, 2012
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For the past couple of years, bullion dealer Tom Cloud has been the precious metals guru on the always-interesting and highly-recommended FTM Daily radio show. He's been in the business for 35 years, can separate the legitimate players from the con artists, and always has a good story to tell. So we've asked him to become a regular contributor to DollarCollapse, via a weekly Q&A in which he'll recap the past week's metals action and cover one or two related topics. Today, among other things, he explains those tungsten-filled gold bars that seem to be turning up everywhere - and how to avoid them.

DollarCollapse: It's a pleasure to finally speak with you, Tom. Let's start with a little background. You've been in the precious metals business for three decades and have developed an unusual niche. How did you get there?

Tom Cloud: I used to be a market maker where I'd take an order for $10,000 or whatever and then buy a [futures] contract to lock in the commission. Eventually we had two full time employees just to do the hedging and even they couldn't handle the volume. It turned into a paperwork nightmare, so we shifted gears. Now I'm a broker who matches buyers with eight of the biggest dealer inventories in the world. I'm always getting deals from wholesalers who have too much of something and are willing to discount it, allowing us to get clients a better price. We don't charge a commission on sales, which means our round-trip prices beat most other dealers.

I also keep you away from the telemarketers, the Swiss Americas and GoldLines that have these 40% markups and put people in rare coins and tell clients that gold will be confiscated. I want to put customers into bullion that goes up or down based on the spot price of the metal, with the lowest possible mark-up.

DC: Has the attitude of your customers changed since the announcement of QE3?

TC: The phone's been ringing off the hook. People get it; they know that the money supply will keep growing and that with a bank account yielding 1%, you've got a guaranteed annual loss of 6% - 10% on your purchasing power. Eventually, people will stop worrying about recession/depression and start worrying about getting rid of worthless paper, and the velocity of money will pick up. That's when precious metals will soar.

DC: How can buyers avoid those tungsten-filled bars that are showing up?

TC: It started with the 400 ounce bars the Chinese and Germans found last year with tungsten in them. No one trades those bars except governments. You'll notice that right after that the Chinese started a massive sell-off of US treasury bonds. Then everything got real quiet and we haven't seen any more of those bars.

Mainland China Treasury Holdings ($ billion)
Mainland China Treasury Holdings ($ billion)

Last week it was ten ounce bars showing up in New York, bought by jewelers who were just trying to get the cheapest price they could. If they had an atomic scale they'd know right away that the bars had tungsten in them.

There are two ways to avoid this. First, don't buy deals off the street. If a guy walks in and says 'I'll sell you these coins at 5% below spot,' I won't buy them. Instead I buy from the US Mint, the Canadian Mint and the major wholesalers, and I've never had a single counterfeit coin or bar come through. And not a single coin goes out to a client that hasn't been atomically weighed. For the past three years we've filmed the process of bullion being weighed and boxed and in that time we haven't had a single complaint about a wrong number of coins.

DC: What's your take on the relationship between gold and silver?

TC: The gold/silver ratio got out of kilter because of central banks buying a lot of gold in anticipation of Basel III making it a Tier One asset. Silver really needed quantitative easing to guarantee that we're not going to have a recession, because in 2008 silver went down 22% in six weeks and gold went up 8%, as people moved to gold for safety and liquidated their silver because it's an industrial metal.

Now, with QE3, silver is the hot thing. We sell nearly as much dollar volume of silver as gold, which means a lot more ounces. I'd expect the gold/silver ratio to keep compressing, which means silver will outperform gold as long as they're printing money and the world doesn't go into a recession/depression.

There will be corrections of course, and the companies shorting the silver market are getting braver all the time. The other day JP Morgan put [the paper equivalent of] 50% of the world's mining supply of silver on the market in five minutes. The price dropped but partially recovered by end of day, which implies that this market is getting harder and harder to manipulate.

DC: What's the wisest accumulation strategy?

TC: I've got a lot of cost averagers who buy $5,000 or $10,000 of bullion each month. But a second group that's really hitting us now is people who have 10%-25% of their money in precious metals already but in just the last few months have decided to increase that percentage. One just called today who went from 35% to 50% precious metals. John Paulson, the 26th richest man in the world, says he has 44% of his fund in metals, and the Aden sisters have raised their allocation from 35% to 45%. Those kinds of things are making people move to higher percentages, and I'm seeing more of them.


For more information or to place an order, call 800-247-2812 or email Tom Cloud at



John Rubino

Author: John Rubino

John Rubino

John Rubino

John Rubino edits and has authored or co-authored five books, including The Money Bubble: What To Do Before It Pops, Clean Money: Picking Winners in the Green Tech Boom, The Collapse of the Dollar and How to Profit From It, and How to Profit from the Coming Real Estate Bust. After earning a Finance MBA from New York University, he spent the 1980s on Wall Street, as a currency trader, equity analyst and junk bond analyst. During the 1990s he was a featured columnist with and a frequent contributor to Individual Investor, Online Investor, and Consumers Digest, among many other publications. He now writes for CFA Magazine.

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