Table of Contents
*This post may contain affiliate links. As an Amazon Associate we earn from qualifying purchases.
Tracking silver prices can be confusing at first, but this is something you will need to master if you have money invested in precious metals or are interested in this market. You need to familiarize yourself with concepts such as silver spot prices and understand which factors influence silver prices.
Finding Reliable Pricing Information and News
It is crucial to use reliable sources of information for silver prices and news. Precious metal dealers and investment companies are typically a reliable source of information for silver investment news.
You can also find up to date pricing information on sites that specialize in financial data. Sites like NASDAQ.com can provide you with real-time pricing data for the silver ticker (SI). If you decide to use another source of pricing data, make sure it is updated hourly.
If you want to find reliable investment news about precious metals, check sites that specialize in financial topics, well-known news sites, and look at what precious metal dealers have to say. Make sure the stories you read are recent and don’t hesitate to do some research on the author or the website that published the story.
You can easily track the price of silver by checking the same reliable websites regularly, downloading an app, or even subscribing to RSS feeds. Don’t hesitate to use different sources so you can compare data.
What Is the Spot Price and How Is It Calculated?
If you read silver investment news, you will find that authors often talk about silver spot price. The spot price of a commodity is the price at which you can buy or sell the asset at the current time.
Precious metal dealers and financial institutions are constantly tracking transactions to update the spot price in function of current offer and demand. The spot price is typically what dealers align their prices on and gives you an idea of how much an ounce of silver is worth at the moment.
Silver is also traded on the US COMEX market as future exchanges contracts. You can purchase a contract for the sale or purchase of silver at a specific price on a given date. The price of these contracts is different from the spot price, but it is often used by precious metal investors because it reflects offer and demand for silver.
Typically, precious metal investors will look at the price of silver futures for the upcoming month with the most trading activity or at the price of the next contract that will expire.
Can You Always Buy or Sell Silver at Spot Price?
The actual silver price you pay when you purchase a bar will be slightly different from the spot price. The purpose of the spot price is to determine how much the precious metal is currently worth.
However, there are other expenses linked to buying or selling precious metals. If you buy coins or bars from a dealer, your purchase will have to cover operating expenses, shipping, and insurance. You should expect to pay above spot price if you decide to buy silver locally since prices will be based on local offer and demand.
If you decide to sell some of the silver you invested in, you will probably have to charge a little above spot price to cover shipping or the selling fees charged by the platform you use to find a buyer.
Some of the silver products you invest in might be worth more than spot price because of their rarity. This applies to old coins and bullion bars that are no longer in production.
How Does the Price of Silver Move?
If you have been keeping up with silver investment news, you should know that the current price of silver has been dropping for a while. These are the many factors that influence the price of this precious metal.
The quantity of silver that is currently available for purchase has a significant impact on how much this precious metal is worth. Currently, 85 percent of silver comes from mining. Only 14 percent comes from scrapping and 1 percent from stockpiles.
A majority of silver mines are located in Mexico, Peru, China, Chile, Russia, and Australia. Any event that could impact mining activities in these countries could result in a reduced demand. A natural disaster could for instance stop production in a mine.
However, because silver mines are located in different parts of the world, production would never stop completely and a single mine having to stop operations would have a somewhat limited impact on offer.
Even though scrapping only represents 14 percent of the global silver production, scrapping can significantly slow down if silver prices fall below a certain level and make this activity less profitable.
The current demand is one of the most significant factors that influence the silver price today. Demand for silver comes from investors and industries. Coin and bar investments are currently the top factors driving demand. North America and India are the largest markets for these investments.
Industrial demand is below demand from investors, but it is a significant factor nonetheless. Silver is a metal with excellent thermal and electrical conductivity, which makes it an important component used in electronics, electrical products, and metal alloys.
As of 2013, 35 percent of silver used in the U.S. was acquired to make electronics and electrical components. Coins and medals accounted for 25 percent of silver sales, and the photography industry represented 10 percent. Jewelry and silverware came next with 6 percent of the market.
The industrial demand for silver is fairly steady and predictable. The photography industry has been using less silver since this precious metal is only used to make films that professionals and some hobbyists still use while a majority of photographers have adopted digital cameras.
Jewelry and silverware production can increase when the economy is in good shape and more people can afford luxury goods, or as new markets appear in emerging countries.
The use of silver paste in photovoltaic cells for solar panels could result in industrial demand sharply increasing, but the adoption of solar energy is still fairly low. New government regulations promoting renewable energies could transform the industrial demand for silver in the future.
Investors can see silver as a way to protect their portfolio from inflation or can favor other investments over precious metals in certain situations. Following trends isn’t always in your best interest, but it is important to understand the factors that are likely to impact investor behavior regarding precious metals.
Economy and Stock Market Performance
When key economic indicators cause investor confidence to drop, they tend to prefer precious metals over stocks and other similar investments. Political instability and even natural events like hurricanes can cause investors to shy away from the stock market and for precious metals to be perceived as a safer investment.
A situation where the stock market is extremely volatile will also make precious metals seem safer and drive demand. Some investors will choose silver as a way of balancing a portfolio while others will purchase precious metals instead of other investments that might have considered if the stock market had looked healthier.
Several things can happen when the economy is performing well. First of all, a strong economy can mean that industrial demand will go up. Investors will purchase silver or invest in ETFs and futures contracts that give them exposure to silver in the hope that silver prices will go up.
The current administration’s projected spending on infrastructure and construction will likely result in an increased industrial demand from the construction sector. This is a trend that could shape the silver market over the next few years.
A strong economy also often means lower unemployment and higher salaries. More people have money they can afford to save up or invest. Some individuals will decide to invest in silver and other precious metals, while others won’t be afraid to take more risks and replace precious metals with stocks.
Inflation is the increase of the cost of goods and services. If inflation goes up, your salary will allow you to purchase a smaller quantity of goods and services. Inflation can be the result of increased demand for goods and services, higher production costs for companies, and an oversupply of money.
Investing in precious metals is a viable strategy when inflation rates go up. The value of a dollar will keep decreasing if the trend isn’t reversed, but the value of a gold coin or silver bar will remain the same. High inflation rates often result in a higher demand for silver and drive prices up. In fact, you might see a price hike when the Bureau of Labor Statistics releases new data.
Mining Stocks Performance
Mining stocks performance is a good indicator of the health of the mining sector. Because there isn’t a lot of data available for industrial demand, a lot of investors look at mining stock performance to assess how strong the industrial demand for silver is.
Mining stocks performance might not always accurately reflect the current industrial demand for silver, but this data is still used by investors to forecast how demand will impact silver prices. If mining stocks are performing well, investors are likely to put money in silver in prevision for higher prices as industrial demand continues to increase.
There is a correlation between the value of the U.S. dollar and precious metal prices. The U.S. dollar gaining or losing value can impact silver prices, but it is difficult to determine how.
Typically, a stronger dollar will result in lower silver prices because investors will be more confident in more intangible investments like stocks. A stronger dollar will also make investors more likely to seek exposure to foreign markets where they will have an advantage thanks to a more valuable currency.
However, some investors might decide to take advantage of a lower demand for precious metals with a combined stronger U.S. dollar to stock up on silver coins and bars at more attractive prices and eventually reverse the trend.
New policies from the U.S. government can impact the silver market, but so can policies adopted in other parts of the world since silver is a commodity traded on a global level.
National Mints and Central Banks
National mints produce a certain quantity of bullion bars and coins. This production can speed up and slow down. Typically, national mints have a very stable production level that is only adjusted to reflect the current demand for precious metals.
Central banks are major players on the precious metal market since they purchase and sell gold and silver. Central banks can stock up on precious metals or sell quantities they have stockpiled over the years.
The Federal Reserve regularly adjusts interest rates in function of the current monetary policy. The current interest rate can make some investments more appealing than others.
A low interest rate will either encourage consumers to spend rather than save and make precious metals a more appealing option compared to other saving vehicles with a low return. On the other hand, a higher interest rate will encourage consumers to save up and more saving vehicles with interesting returns will be available.
Other Precious Metals
Diversification is the key to a successful investment strategy. A lot of investors who hold silver also invest in other precious metals.
The spot price of gold and silver are closely connected, even though it is difficult to predict how one will impact the other. If the gold spot price drops, some investors will purchase gold coins and bullion bars instead of silver. Platinum and palladium might even become appealing alternatives to silver if the price of these metals drops below a certain level.
The silver market is very unique since there is both a strong demand from investors and a sustained industrial demand. Silver peaked in 2011 and has been plateauing since the beginning of 2018 between $16 and $18 an ounce.
Even though this precious metal is volatile, it is a viable alternative to other investments since it hasn’t dropped under $13 an ounce since 2016. However, keep in mind that any of the factors listed above could impact this market and that you should carefully assess the risks you are taking and protect your investment via diversification.