People looking to invest in precious metals find silver as a good option. Like all precious metals, the price of silver also fluctuates.
Gold and silver have daily opening and closing prices. Many people wonder what factors affect the prices of silver.
To know these factors, click here.
A decade ago, silver was widely used in the photography industry due to its light-sensitive characteristics. However, as technology progressed, new products were launched that used other light-sensitive elements, leading to reduced silver use. Many companies have old stocks of photographic films for recycling.
Similarly, the market is flooded with old silver coins, silver jewellery, and other products intended to be melted. How much silver scrap and readily accessible stockpiles have been exhausted has a direct effect on commodity prices.
Demand vs. Supply
It is one of the critical factors that affect the prices of silver. The supply of precious metals is limited, and global demand is huge in comparison. Silver is used in many industries, and its demand is ever increasing.
For example, if a company announces it will use silver in its solar panels, the demand for silver will increase, causing the price to rise. Similarly, if a strike or work is stopped at silver mines due to some incident, the production drops that cause the price to surge temporarily.
The upward and downward movement of the economy also affects the prices of silver. When the economy moves upward, and people are earning good, they tend to invest more in precious metals.
For example, people buy silver jewellery and items when the economic trend is upwards. When the economy is moving downwards, people face financial difficulties, and they are less likely to invest in precious metals like silver.
The demand for high-luxury goods that use silver also drops, leading to reduced demand for silver. Hence, the economic level indicator is a sign to watch for when investing in precious metals.
Though there is no direct connection between gold and silver, you will often see precious metal prices rising or falling simultaneously. This trend is not new. If you look at historical price trends of both precious metals, you will see that silver prices have also surged or dropped whenever the gold prices have risen or fallen.
The reason is many investors hold silver like other precious metals to protect against falling markets or currency devaluation. In most cases, silver is known to follow gold’s trail in terms of prices.
According to financial experts, government policies affect silver prices as well as prices of other metals. Government policies that encourage production work to strengthen the currency. It makes investments in precious metals less attractive, causing the prices to drop.
The national debt also has an impact on the prices of silver and gold. Nations with large debts could utilise the gold and silver reserves to ease pressure on the economy by shifting liquidity from gold to equity.
All this causes the prices of precious metals to drop. Now that you know the factors that affect the silver prices, you would be better positioned to make the right decision to buy or sell silver.