Silver, just like gold, is popular amongst many coin collectors and investors for the same reason of beating inflation and staying comfortable during an economic turmoil. Nicknamed ‘the white metal,’ this precious metal is seldom used as a base metal too. Silver’s value can’t be emphasized enough, especially in industrial technology. Its softness and malleability, and ductility makes it very useful and valuable. Silver is also used for electrical and thermal conductivity, sensitivity, reactivity, and high reflectance of light.
While all those qualities give rise to industrial demand, individual and commercial demand also rises as silver is a liquid asset and a safe haven for investors and collectors looking to invest in silver. This and a variety of many other market dynamics constantly influence the price of silver. Like gold and other precious metals like platinum and palladium, the behavior of silver prices is often linked with the state of an economy. Let us guide you through ten factors that influence silver prices.
Silver prices today: What influences the rate?
In addition to its lower investment value and demand than gold, the silver price is not as volatile as some other metals and stocks. However, on a timely basis, there is a wide array of factors that influence the price of silver. Silver prices have been generally affordable for many years, but as demand skyrockets in the coin market and most industrial sectors, the price will rise and fluctuate.
Historically, silver’s most significant rise (+15%) occurred during the biggest bull market in the 1970s. Toward the end of 1970, silver became premium when the price hit $48.70, but the purchase price was below the spot price. After the 2020 global pandemic, silver prices are going up. The uncertainty of the world’s economy also contributes to the flux in silver prices. However, understanding essential market dynamics and how they affect the precious metal market will not only serve as an investment guide but also assist you in building a successful silver asset portfolio.
Below, we’ve outlined 10 of the basic factors that affect the trends of the silver market and what you should know concerning them before proceeding to invest in silver.
10 factors that affect the price of silver
1. Economic Trends
The state of an economy contributes to the movement in silver prices. The downwards or upwards trend of the economy plays a vital role in dictating how likely people are to invest in silver. For instance, silver jewelry and items are purchased more when the economic trend is upwards. But, when the economy moves downwards, financial difficulties occur, resulting in a low possibility of precious metal investment.
These different scenarios affect the price of silver. On the other hand, when the economy is bad, some investors rush to precious metal investment in order to secure their funds.
2. U.S. Dollar Stability
The U.S. Dollar is the global base currency for commodities such as precious metals. Another way of saying this is that gold and silver are bought with the U.S. Dollar. As a result, if the U.S. Dollar grows weak, silver gets less expensive, and the price of precious metals generally escalates. On the contrary, when the value of the U.S. Dollar increases, investors find silver more expensive, and on the mainstream market, precious metal prices drop.
3. Supply & Demand
Supply and demand are one of the most fundamental market dynamics that affect the prices of silver. The global demand for silver is high; industrial use of silver alone accounts for 65% of the world’s silver supply, yet supply is limited. The potential for the demand for silver to increase is still way up there.
For instance, say a leading company decides to change its solar panel type by making use of silver, demand for silver is inevitable, and as a result, prices will rise. Conversely, if work stops in silver mining sectors, the production rate will reduce, thereby causing a temporary surge in the price of silver.
4. Silver Scrap
Ten years ago, the use of silver was a popular element in the photography industry. It was widely used at the time due to its light-reflective and sensitive quality. However, following the advancements in technology, new light-sensitives were made, which reduced the general use of silver.
Likewise, the coin market is overflowing with old silver coins, jewelry, and other silver items intended to be melted. The amount of silver scrap and freely accessible old film stock that has been abandoned directly influences silver prices.
5. Global Turmoil
The overall timing of the globe, what occurs at different times, global trends, and situations are other contributors to silver price trends. During the 2020 lockdown, technology companies stood atop the market as people switched to the digital world- working from home and shopping online. This contributes to the trend in silver prices more than gold because silver is highly essential to tech industries.
In the same global crisis, millions of people had to give up their jobs; the lockdown put a limit on spending. But, the versatility of silver was able to keep this asset firmly in the game during tough times.
When inflation rises, it also puts on a dramatic show on the commodity market. Inflation causes prices of commodities to skyrocket; as a result, investors rely on precious metals like silver to use as a hedge against inflation. The U.S. Dollar becomes weak during inflation, thereby pushing many investors to buy silver investment products.
From the relationship of the base currency with silver prices, it is evident how inflation can influence the curves in silver prices.
7. Government Policies
Government policies that work toward a strong production rate of sectors in the economy strengthen the currency. In times like these, precious metals investment is less popular, and the prices drop. Metals primarily used (like silver) will cause demand to rise.
In addition, national debt also impacts the price of silver. Frequently, the government enforces policies that entail utilizing silver and reserve’s to ease economic pressure. This action contributes to the price trends of various precious metals like silver.
8. Gold Prices
If you observe historical price charts, you’ll notice that silver prices have always risen and fallen whenever gold prices surge or drop. Many times, silver follows gold’s trail in price. That’s one of the reason why the silver/gold ratio exist on their price charts.
The price of gold is a determinant for speculating silver prices and trends. Although the movement of gold’s price is slow compared to silver, it continually affects how high or low the silver price gets.
9. Technological Advancements
There is a lot of room for silver to grow in value and demand. Silver is majorly demanded in advanced techs, such as 5G wireless and photovoltaic cells (the base element of solar panels). Silver is very useful for a variety of tech processes; therefore, the fast pace growth of the technology industry will forever affect the price of silver.
10. Large Private & Institutional Investment
Asides from the last influential effect on silver by the Hunt Brothers, in 1997, successful business investor Warren Buffet bought 4,000 metric tons of silver for approximately $585 million. Again, in April 2006, iShares established an exchange-traded fund for silver. In 2008, The exchange-traded fund (ETF) called ‘iShares Silver Trust’ had over 180 million ounces of silver in its reserve. This already shows how much power large investors have over market prices.
Frequently Asked Questions
What is the current price of silver?
The current price of silver is $703.51 per kilogram. This price is likely to fluctuate in the space of hours or days.
Is silver a good investment in 2022?
If you’re looking to invest your money in precious metals, consider investing in silver because it offers favourable returns. Silver is a good buy and is not overvalued, making it a safe investment asset.
When should I sell silver?
To acquire the most gain for your silver coins or bars, sell it at prices and demands are high. However, if you own any silverware or jewelry that you no longer need, you should sell it for cash instead of keeping them clustered in your cabinets.