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The below editorial is written December 2008 by Liberty Silver's CEO Dan Torgny Persson
Gold & Silver as an investment
Gold & Silver is the best storage of wealth.
USD $1 1908 = 2-3 cents 2008.
1 troy ounce gold or silver 1908 = 1 troy ounce gold or silver 2008.
Gold & Silver have an intrinsic value since its rare and highly demanded in the industry, as jewellery and as an investment.
There can be no inflation in Gold & Silver since the quantity of Gold & Silver is constant. Some Gold & Silver has been mined and circulates above ground and some is left below ground waiting to be mined. The total amount is however constant.
Paper money comes and goes but Gold & Silver persists. No paper money has ever survived more than a couple of decades. The value of Gold & Silver has persisted for thousands of years. The amount of paper money is increasing rapidly. The current increase rate for money supply is 19% in the US, 13% in Great Britain and 10% in Sweden. Most every country has similar high inflation rates. The amount of Gold & Silver in the world doesn't increase at all. The result being that there is more paper money for each unit of Gold & Silver. The price of Gold & Silver will therefore increase over time.
Gold & Silver is measured in weight. Paper money is measured by a printed number. These numbers are set by politicians, banks and consumers. Paper money is created by debt or political decisions and creates "bubbles" due to debt consumption.
Today there are "assets" for € 600 000 000 000 000 in the world. These take different forms of derivatives, bonds and paper money. A yearly increase of merely 10 % results in an increase of € 60 000 000 000 000 per year. In comparison only 20 839 metric tons of silver was mined last year. 18 137 tons where used for industrial supply.
Why Silver and not Gold?
You don't have to make a choice between Gold & Silver. Silver can be used as a complement to gold for your investments. We have however listed some of the advantages of silver compared to gold.
The industrial demand and the monetary demand are higher for silver. Silver is commonly used as an industrial component. In addition, Silver is better suited as currency since its price is less than Gold. Until the last decades, Gold & Silver have always been used as money. When Gold & Silver again will be used as money, silver will be needed more than gold because of its lower value.
The historical relationship between Gold:Silver has been 10:1. The last three years, the relationship has fluctuated between 40:1 and 90:1. If silver returns to the historical relationship of 10:1 from today's value of 75:1, silver will make you 7.5 times as much money as gold.
Almost all silver mined is used for industrial purposes. This allows a very small investment demand. If the demand for silver as an investment increases, the price will also increase.
Why physical Silver and not Silver certificates?
Have you asked yourselves what will happen if the supplier of the certificate goes bankrupt? How many banks and financial institutes have managed to avoid the financial crisis so far? Not many...
What would happen if the Nymex/Comex commodity exchanges can no longer keep their promises of delivering silver to the holders of the certificates? We believe that the Nymex/Comex spot price is irrelevant since it's not backed with real silver. The demand for physical silver is strong and physical price has decoupled from the paper spot price.
Since the 1950's, silver use and consumption, has made silver more rare than gold, in above ground, refined and deliverable forms.Estimates suggest there are 200-300 million ounces of refined, above ground silver available to the market at the present time. Each silver contract on the commodity exchange is a promise of delivering 5000 troy ounces. Frequently there are 200 000 Silver contracts in circulation. 200 000 contracts * 5000 troy ounces = 1 000 million of troy ounces.
How is it possible that there is only 200-300 million troy ounces of Silver above ground and at the same time 1 000 million troy ounces of circulating paper silver? The answer is that it is not possible. The more people that takes delivery from their contracts, the higher the risk of the commodity exchanges to default on their promise to deliver the silver. The price of physical Silver will go to the moon when the exchanges can no longer supply the market with their paper Silver.
Don't buy certificates with a promise of delivery. Buy real physical silver. |
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