Nov 23

Why Silver Prices Fluctuate so Dramatically

Posted in Investing

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.

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