6 Factors that Influence the Price of Silver
Silver is a valuable precious metal with strong historical importance. Although not as valuable as gold, this stunning white metal has a good demand due to its rarity and wide range of industrial uses.
Understanding the factors that influence its price will help make better decisions when investing in silver. Here are the six factors that you must know:
1. US Dollar
Silver’s price is quoted in US dollars like most commodities. Therefore, USD has a negative correlation with silver prices. So when the value of the USD increases against other currencies, it decreases the price of silver. In contrast, when the US dollar is weaker, the prices of silver and other precious metals spike. Silver prices have a high inverse correlation against USD.
2. Supply and Demand
Supply and demand play an important role in determining the price of each product. Like other precious metals, the supply of silver is limited, whereas the demand is constant, making it quite valuable.
When the supply or demand of silver shifts, its prices also changes. If a miner has reduced the silver supply, the prices will see a massive increase. Similarly, high demand will also increase the prices.
In the past, silver was used for many purposes such as photography, mirrors, tableware, etc. Technological advancements are replacing the use of silver in many applications, influencing its prices. For example, stainless steel is used in household items rather than traditional silver. However, some new technology requires silver, such as solar systems, due to its unique physical metal characteristics, affecting silver prices and making it irreplaceable. Hence technology is a strong factor influencing silver prices.
4. Gold Prices
History shows that the price of silver has a strong relationship with gold prices. Whenever gold becomes expensive, silver does too. Most traders monitor the gold-silver ratio (GSR) for their trading activities. This ratio tells the amount of silver it takes to purchase gold, and its highs and lows impact the investments.
5. Economic Trends
The economic health and growth of a country are also considered essential factors for silver demand and prices. During good economic conditions, people have higher incomes, and they spend more money on luxuries such as jewelry containing silver. When their incomes drop due to a financial crisis, most people stop such purchases, but the demand for fine jewelry and watches is still there.
If we consider macroeconomic trends, silver and gold are the most common safe-haven investments for people. Whenever the economy gets bad, and inflation rises, people buy silver and other precious metals because they are more valuable than paper currency. This also affects the prices.
6. Government Policies
Although gold is a more important reserve, central banks worldwide also trade silver bullion. The US Mint produces both silver coins and bullion and has the largest supply of silver globally. Therefore, government policies also affect silver prices.
At Orion Metal Exchange, you can buy silver, gold, and other precious metals for IRA investment or other trading activities. We also offer secure vault storage, so you don’t have to worry about their safety. Contact us for details.