The value of silver as a precious metal has been known for a long time: used for jewelry, as a medium of exchange (currency), tableware of immense value, utensils, photographic film, disinfectants, antimicrobial, antibiotics etc. Indeed silver does have a great value, for this reason it is designated as the second most important precious metal after gold. Considering the relevance that silver plays in the world, one cannot help but to wonder the reason for its consistence yo-yo jumps alongside other metals like: platinum, gold etc.
Silver Trading Overview
Silver like other precious metals is traded under international platform or commodity market, where it is sold in its raw form. For 4000 years and above silver has been considered as a form of money and storage of values, the situation was however changed after the fall of the silver standard which resulted in silver losing its role as a legal tender in the USA. So its demand shifted from being used as a means of currency exchange to industrial purposes like jewelry, exchange funds, and bullions. Although, silver is comparatively inadequate in supply, compared to other precious metals, it is abundantly available and relatively inexpensive.
In explaining the reason for the frequent fluctuating shift of consumers interest in silver as against other precious metals the behavioral pattern of silver prices against one of the other metals – gold, will be examined, perhaps this information will aid in pointing the finger in the right direction.
In 1840 the price of silver per ounce was $1.29, while gold was $20
60 years later in 1900 to be precise, while the price of gold remained stable at $20, the price of silver declined to $.60.
In 1970 silver prices rose to $1.63 while gold prices rose to $35 and in 2010, as November the price of silver still on the high side increased to almost $30.00/oz, while gold skyrocketed to $1379/oz.
In the table of precious minerals like: silver, palladium, gold rhodium and platinum, silver happens to be the cheapest, but most useful after gold. However, platinum happens to be more expensive than gold and silver put together why?
Reasons for Fluctuating Silver Prices
The reason for silver’s fluctuating dance is most probably due to availability. Amongst the four prominent metals, silver is the most easily sourced and abundantly available. This is also the main reason for the rise and fall of price. The major determinant of the value of precious metals is based on availability. Gold compared to silver is very scarce, the same goes for other metals, for that reason its demand is elastic.
Mining and Processing of Silver
Silver is relatively easy to mine, while other precious metals are difficult to mine and process.
Storage of Value
The storage value or future value of silver is low compared to other metals. While other metals are known for erratic jumps in price, silver is known for a snail’s pace.
The fluctuating behavior of silver’s price against other metals is predominantly based on their intrinsic values.
Gold is the most popular precious metal with chemical symbol of Au, and atomic number of 79. Like silver it has multifarious usage consisting of coinage and jewelry. It appears in different forms like: nuggets, dust, veins, and alluvial deposits. It requires a boiling point of 5173 °f to melt gold and addition of alloys like copper, nickel, etc. to calcify into physical structures like bullion. It can be used as a medium of stored value. Therefore, due to this importance and gold standards, gold provides a basis for monetary policies and is connected to different imagery presentation and beliefs. Gold has diverse usage and investment happens to be a major relevance of gold.
Gold and its usage
- Gold is used as a monetary exchange. Used globally as an avenue of monetary exchange by issuance and identification of gold coins.
- Gold can also be stored in the form of gold bars and bullion and used as an hedge against price fluctuations.
- Jewelry: Due to the malleability of gold, it is often solidified using compound of alloys to change its hardness, melting point, color and ductility – capable of being formed into wire and other materials for onward use as jewelries.
- Medicine: Gold is beautiful, and the ancient man thought so too, and to emphasis their respect they believed that something so beautiful and rare should have relevance to man’s health. This believe in modern times is given a push as injectable gold is confirmed to assist in reducing pain, tuberculosis, and rheumatoid arthritis. Add to this, alloys of gold are also confirmed to be useful in restoration of tooth crowns and bridges.
- Nutrition: Au or gold can be used in food and drinks. The raw form of gold is used in drinks and design ingredients.
The Main Reason One Should Invest in Gold
The above are some of the uses of gold and it is by no means exhaustive. Among the reasons mentioned, investment is the most popular. Why? As already mentioned, gold is used as a means of hedging inflation. With the gradual decline in the world economy that has overwhelmed even the strongest financial organization, one is therefore pushed to embrace the opportunity available in using gold and other precious metals to hedge inflation. What this means is that an individual can put his or her money on gold as store away wealth for a period of time without fear of liquidation, to ward off possible states of bankruptcy. For example, in the past 170 years the price of gold has been increasing; in 1980 when the price of gold was $612/oz, an investment of $20,000 will yield a whooping 225% returns on investment if it was sold this past October’s price of $1379/oz. If this is not a good enough reason to invest in gold, then what is?
Like silver, investing in gold is a smart choice that will surely keep inflation away.
As the world economy comes crumbling down, and the fever of bankruptcy continues to threaten, the urge of combating this impetuous condition has forced people to start considering other sources of income apart from the initial income avenue. For this reason a group of financial professionals and other experts alike put forward the dictum of “different sources of income” with commodity investment taking the lead. Is commodity investment proficient in wiping out the inglorious insolvency? To answer this question the pros and cons to investing in the commodities market will be examined.
Overview of the Commodities Markets
Commodity is an opposite version of a service. In a business environment two forces dominate the index of commerce and they are product and services. Commodity happens to belong to the product genre and unlike traditional products like consumer products it has what economics call inelastic demand, which means no matter the condition of the market, there will always be a demand for it, for example: precious metals, crude oil, etc. Commodity markets are a place where commodities are sold to willing consumers, and like the regular market condition, it is determined by the forces of demand and supply operated under regulated commodity exchanges. It consists of direct and derivative trading. The performance of commodities markets have a good share of robust trading in the past 5 years till 2007 with over 17% upturn in trading volumes, while over the counter derivatives experienced an equally robust trading of over 500%. No doubt, commodity markets have had a great share of profitable trading, which directly boils down to good business for buyers and suppliers. However, like all other human invention, commodities market has its own advantage and disadvantages, or pros and cons, they are:
Flexibility of the Commodities Markets
Trading under the auspices of a well established market creates an adaptable operating condition for buyers and suppliers. The two forces are given a stable business environment to operate on; the right trading resources, information (very vital), and multiple trading opportunities. For instance there is an opportunity of trading spot trading, forward contracts, future contracts, and hedging.
Security of the Commodities Markets
The possibility of becoming a victim of fraudsters is limited, as all stakeholders or investors undergoes strident security checks and due diligence before they are allowed to trade on the platform.
Gaining Information on Commodities Markets
Lack of information is tantamount to deformity. An uninformed business man is likened to a farmer that goes to farm without basic farming tools and experiences the consequence: failure! The world of commodity trading is very vast, filled with rickety bumps all the way. So, there are faceless opportunists waiting to ride on ones intelligence and foolishness, but with commodity market, ample information is provided to ward off such possibilities.
Cons of the Commodities Markets
- Insensitivity: The major players (buyers and suppliers) are deprived of the power of choice as they are bound to obey already laid down faceless rules and regulations whether they like it or not.
- Bureaucracy:In case of complaints, disagreements, and any other relevant possible future challenges, the road the buyers and suppliers have to travel, to have their issues tabled not be able to talk of considerations by the operators in the commodity market is long and windy.
The advantages to investing in commodity market far outweigh the disadvantages; this therefore means that commodity trading in the commodity market is a good idea.
Silver is the most abundant, easily mined and the least expensive among precious metals like: gold, palladium, platinum etc. It has a melting point of 1763.30f, after gold it is the second most important metal having multifarious usages like: jewelry, currency, table ware, antibiotics and many other uses. Among other metals silver has the highest thermal and electric transmission, after diamond and helium. The use of silver has been on for more than 4000 years, but it wasn’t till 1974 that the usage as a legal tender was dropped therefore leading to a grand switch to adoption as industrial applications like: jewelry, bullions coins, and ETF (exchange traded funds). Aside from the discontinued use as a legal tender, silver still have many other uses constituting reasons to invest in silver.
In the last 15 years the price of silver have been in a constant shift upwards as against the earlier drop from $1.29/oz, to $.64/oz in 1840 to 1900 respectively. In November 2010 the price of silver rose to an all time high of $29.82/oz, as against the $1379/oz price of gold. From the above price trends it is clear that silver is indeed very valuable. Despite the fluctuating tendencies in price, people still prefer to invest in silver and the reason is mostly due to the fact that silver like all other precious minerals is valued due to its attractiveness, and comparative scarcity in the earth crust, and excellent features. Silver, aside from being a major indicator of wealth, has a mysterious glare that draws onlookers into its mischievous luster. Looking for interesting opportunities? Invest in silver, below are 10 reasons to invest in silver.
Reasons to invest in silver
- It is one of the primary metals traded in the metal commodity market.
- Silver will make a wonderful investment portfolio. Producing a mix of silver with another metals like gold and major stocks will ensure a formidable and insolvent resilient investment thus providing balance in the face of a fluctuating economy
- Silver, like other precious metals, provide an edge over the declining United State’s dollar purchasing power, for example, the downward decline in the dollar since 1971.
- Precious metals like silver guarantees asset location, this is why professionals have advised that investors should have an investment portfolio consisting of 15% investment in precious metals.
- Possessing silver bullion is easy and expedient
- Due to the multifarious uses of silver and significant adaptive features, silver has its demand rooted in diverse sectors like: jewelry, medicine, superconductivity, electronics, water purification, and coinage providing ample opportunity and flexibility.
- IRA benefits. Individual retirement account holders are at liberty of creating investment portfolio in IRA’s, as long as its quality is the same or above 99.9% silver
- It is cheap and valuable at the same time. Talk of double values for money.
- Constant value. Judging from the stable price trend of silver above, it is obvious that investing in silver will create a significant return on investment. For instance for over 15year the price of silver has been increasing; what a dependable figure!
- Never in the history of precious minerals has there been a record of irrevocable market depreciation as compared to stock markets; over 15 years of huge increase in silver, it is a formidable example to hold on to.
Investing in silver is the right way to maintaining solvency and preventing liquidation.