Can Cities Legally Buy Silver or Gold?

(Legally, according to the CA code?  What about other States?!)

Silver Stock Report

by Jason Hommel, December, 2010


The precious metals community of advocates may need legal assistance.  Position letters, or even lobbying.  Most of the money in this world, in the USA, sits in government pension plans.  Some of those who direct such plans say they are not legally allowed to buy silver or gold.  Is this true?  Do we need to change the law?  Can they buy certain ETF's?  I need help to be able to answer these questions.

Please read the following exchange:

A Precious Metals Advocate writes to a City Manager:

I have suggested to this council that they take a hard look at precious metals for investing the treasury funds of Culver City. I first asked the council to do this in Dec 2008. Gold was under $800, it currently is approaching $1400. In the CAFR from 2008-2009 the treasury reported a less then 4% return on investments. Not bad but had you invested in gold this return would have been even higher. I must now caution you that the US dollar will be declining severly in purchasing power by Spring 2011. I therefore implore you to protect our community now by diversifying a portion of our cities investments in physical precious metals, not ETF's or other paper promises for silver --

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A City MPA Assistant Manager responds:

Good morning,
 
Thank you for sharing your thoughts on the City’s investment portfolio.
 
Unlike individuals and private corporations, the City’s investment of the public’s money must comply with very high levels of safety and liquidity.  Through enactment of Sections 53600 et seq. of the [CA] Government Code, the State Legislature provided the types of investments that local governments may make.  The link above provides the text of said Sections of the Government Code.
 
Gold and other precious metals are not eligible investments under the Government Code.
 
Have a good Monday.

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The Precious Metals Advocate asks for my help, and writes:

Jason my man, been following you for a while ever since I first came across your articles on silverseek.com.
 
I have been trying to get my local govenment to invest in gold and silver since 2008. Today I finally got a reply from my local government that gave me some insight into why they have stonewalled my inquiries for so long, they claim they can't do it because of the laws regarding investments of monies by municipalities.
 
Do you know any way that a local government can legally buy physical precious metals?
 
http://www.leginfo.ca.gov/cgi-bin/waisgate?WAISdocID=86620914075+1+0+0&WAISaction=retrieve

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I respond:

I read the CA code sections from
53600 to 53610, the end of the section.

I never saw any prohibition of investing in gold or silver.

I did find this, which would support the investment into gold or silver.

It says:

http://law.onecle.com/california/government/53600.5.html

"When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, the primary objective of a trustee shall be to safeguard the principal of the funds under its control. The secondary objective shall be to meet the liquidity needs of the depositor. The third objective shall be to achieve a return on the funds under its control."

Thus, investing in gold or silver would meet all three objectives.

So, I fail to see the problem.

All of the rest of the sections provide limits on the types of bonds that a city may invest in. 

Gold and silver are not bonds, and thus, would be exempt from all of the limits.

But consult a lawyer.

Sincerely,

Jason Hommel

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Readers, can you help?  I cannot hire lawyers from all 50 states; that's beyond my capacity.  But I can post position letters, if you get such a letter from a lawyer in your own state, and I can host such letters, for further reference at my website, to help enable city managers to invest funds into physical gold or silver. 

Please help me.  Consult a lawyer.  Advocate precious metals investments to your city.  Let me know the results. 


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JH MINT & Coin Shop, Grass Valley, CA -- minimum order $5000 for free shipping, USA shipping only.
Open 10AM to 5PM Pacific Time, Monday to Friday, closed weekends and bank holidays.  (Also Closed from Dec. 25th to Jan 1st)
www.jhmint.com
(530) 273-8175

Kerri handles internet phone orders:
kerri.jhmint@yaoo.com
(530) 273-8822


Sincerely,

    Jason Hommel
    www.silverstockreport.com
    www.bibleprophesy.org