The below editorial was written December 10, 2008 by Liberty Silver's CEO Torgny Persson

What is the price of silver?
I often get the question: “What is the price of silver”. This might seem like a simple enough question to answer but it is more complicated than it first seems.

Over the last years most people have been referring to the commodity exchanges (e.g. Comex) for silver price reference. Over the last six months, more and more people have stopped referring to the commodity exchanges for silver price since there is no longer any physical silver, in small quantities, to find anywhere near the spot prices. If you buy a Comex future contract, you are eligible to take delivery of the 5000 troy ounce (155.5 kg) silver that the contract represents. To take delivery is a complicated process involving many months waiting time, significant paper work and various fees. Most brokers, like Interactive Brokers which I can otherwise recommend generally, to the extent that anything in paper can be recommended, don’t even allow their customers to take delivery and instead settles all expired future contracts in cash.

No one has really bothered about taking delivery for years. People have instead bought future contracts and certificates trusting that they are backed up by the silver that is stated on them.

Paper silver
Can paper silver be trusted? As the price of physical silver has decoupled from paper silver, wealthy individuals, for whom it may be worthwhile to pay the fees associated and go through the paper work, are now starting to take delivery of physical silver. The result is that the physical silver in the Comex warehouses is gradually depleting. According to several newswriters such as Theodore Butler and Jim Sinclair, the result may be that Comex soon has no physical silver left for delivery causing the price of real physical silver to decouple even more from the price of paper silver.  

As a result of more and more people doubting that paper silver is backed up by physical silver, the price of real physical silver has decoupled from paper silver. The ironic of this is that if you bought paper silver such as futures or ABN certificates when silver was trading around $20, you have lost around 50% compared to your purchase price. If you however bought physical silver in Europe when the spot price was $20, you can still sell the silver for close to the same price.

Physical silver
Liberty Silvers prices are competitive from a Swedish, Scandinavian and European market perspective. The best (and only before Liberty Silver) market source of silver in Sweden is the auction site www.tradera.com which is owned by Ebay. Tradera therefore serves as the best approximate for the Swedish market price of physical silver. Below is the statistics for completed auctions in the two months between October 5 – December 5.

1 oz silver bars: 48 auctions completed. Average price of SEK 186  (€ 17.6*)
1 oz silver coins: 37 auctions completed. Average price of SEK 209  (€19.75*)  

 *Exchange rate SEK/EUR 10,58 as of Dec. 10

The market price in Sweden for 1 oz silver is hence approximately SEK 200 (€18.9) at the same time which the spot price of paper silver is SEK 82 (€7.75 or USD$10). If physical silver was bought for SEK 200 in March when the spot price was touching SEK 130, it can still be sold for SEK 200 even though the spot price has decreased with 37% calculated in SEK.

The prices of silver in the US also (even though the US doesn't have any VAT on silver) attract a significant premium compared to the paper price. A good comparison of physical silver prices compared to physical spot prices in the US can be found here.

Comparison between physical silver and paper silver

Paper silver such as Comex futures or ABN certificates bought in March: -37%
Physical silver bought in March: +-0%

Liberty Silvers prices compared to the market price
An article about Liberty Silvers prices compared to other European prices can be found here (in Swedish).

Liberty Silvers prices are comparative or cheaper per oz compared to the average prices found on www.tradera.com.

The only other source of physical silver in Scandinavia which have physical silver available for delivery, which we are aware of, is Hopea in Finland. Hopea’s prices can be found here and are on average more expensive than Liberty Silver’s prices.

Liberty Silvers prices are also competitive compared to Chards which is the largest bullion dealer in the UK that we are aware of. 

Summary
This article has shown the benefits of owning physical silver compared to paper silver. With paper silver you take the risk of you bank or broker going bankrupt and the risk of Comex defaulting. With physical silver you own a product that has been used as a means for money and barter for over 4000 years whereas no paper currency has survived more than a couple of decades.