What Determines Silver Prices Today?
Silver prices today are determined by many different factors and it is difficult to determine exactly what causes silver to be a certain price at any given time. There is no equation or magic formula that will determine this. If there was, then investing in silver would be a useless pursuit because prices would always be the same. However, there are a few generalizations that can be made that will give us a basic understanding of when silver prices are high versus when silver prices are low.
Silver is a tradable asset known as a commodity. A commodity is basically something that people want which people are willing to pay for. Examples of other commodities include oil, gold, pork bellies, and soy. It is different from other tradable assets such as stocks because it doesn’t matter who produces a particular commodity; it is all traded as a single item in the commodities market. On the other hand, it matters greatly who produces other items which are traditionally traded within a stock market. For example, traders care a lot whether a car is produced by Mercedes Bens or Toyota. Alternatively, it matters whether a hamburger is made my Mc Donalds vs Burger King. This does not matter with commodities. A piece of silver nugget in the United States will be worth the same as a silver nugget in Thailand.
What determines silver price today is based on how well silver is performing as a commodity in the commodities market. What determines this is simply supply and demand. The more people who want silver, the higher silver prices will go up. There are relatively fewer factors that determine commodity prices than there are factors that determine stock prices. Stock prices go up and down due to financial information released by the companies that issue them. They consider many things such as profits, the performance of their investments, and capacity for further growth. Prices for commodities such as silver, gold, and other precious metals are more straight- forward. It is based on the principles of supply and demand, and little else. This is why prices for silver and other precious metals are currently at all-time highs. Lots of people throughout the world the world are willing to buy silver and there is not enough to go around because not enough people are willing to sell.
There are stock markets and there are commodities markets. Commodity markets are where contracts are where contracts for commodities are exchanged. Some are physical locations and others are virtual and only exist in cyberspace. Within these markets, there are a number of more complicated transactions that a trader can partake in. The most basic trade is called a spot trade, where a silver dealer has the commodity and the buyer examines it and buys on the spot. There are also silver futures trades where the buyer agrees to buy from the seller at a certain date for a guaranteed price. This ensures that the seller will receive the price he wants. Let’s say there was a massive influx of silver in the market, selling in futures allows him to still sell his silver for a price before the influx. Silver futures benefits the buyer because it safeguards against massive spikes in price. A silver buyer can ensure that he won’t pay an inflated price if silver demand suddenly rises.