First, there is a contingency out in the precious metals camp that “gold” is the only asset that is not at the same time someone else’s liability. This is a mantra that is only partially true. Any thinking person would recognize that silver, copper, or firewood would represent an asset that is not someone else’s liability. This of course is based upon the fact that the commodity is owned outright. We could argue that any tangible asset could be considered “another” asset that is not simultaneously someone else’s liability. I plainly do not buy the idea that gold is the ONLY asset that is not a liability to someone else!

We should explore this a bit further, though, because at times we hear that gold is the only financial asset that is not at the same time someone else’s liability. This is a much stricter definition. From last week’s column, the case was made that silver and gold both are considered monetary assets by the marketplace; then again, the Western mindset often is centered on gold and gold only.

It must be emphasized, however, that gold and SILVER are the only two commodities that have derivatives exposure that is nearly identical to all other “monetary” assets. In plain English, both precious metals are treated in the fiscal markets as “money,” the same way bonds and currencies are treated. Before someone states that this is my opinion only, proof of the statement is my interview with one of the prime commodity experts on Wall Street; he plainly stated what I share with you now and was recorded on my opening e-TV show, Mining Industry Review, so many years ago.

Simply, gold and silver in physical form, bullion or coins, are on one side of the economic fence and everything else is on the other side. This means that all other financial assets owned outright or otherwise are dependent upon the “system” for settlement. This is what the current strength in physical gold and silver is shouting at us right now. But you must remember there are lots of gold and silver derivatives out in the financial system that are a liability to someone else.

Again, physical gold and silver stand alone and could be used directly (or at least stand outside the system), so in a worst-case scenario during a panic sell-off or even a panic buying spree, these two assets do not need a bank, broker, or middle man to turn them into something liquid to spend. They are really the ultimate form of cash and in times of financial uncertainty are wealth preservers all by themselves.