What's Up With The Price of Silver?
Silver hasn’t been a sure thing in recent history. Over the course of the past 5 years, the price of Silver per ounce has undergone quite a bit of fluctuation. 2016 and 2017 saw an increase in value at a relative 15.8% and 7.2%. However, 2018 saw a drop in value of nearly 9.5%.
A great deal of speculation has been made towards where silver where go from here. Thus far, 2019 has been on the upswing from -9.5% to -3.6%. But what about going forward? Let’s take a look at what drives the price of silver.
THE PRICE OF PRECIOUS METALS
One of the most popular uses of silver and gold is commodity and future exchange. Silver and gold coins, bullion and ETF’s are purchased and traded as investments. However, silver and gold are highly volatile investments. It seems that often times people make the mistake of investing in silver and gold as value holders. Fluctuations in silver and gold prices over the past 50 years, however, indicate this not to be true.
Over the past 16 years, silver has gone from $7 per ounce to $14. While these numbers seem reassuring, it’s important to note that its value underwent a significantly larger spike in value in 2011 at $52 per ounce.
What does this mean overall? Well, it indicates that silver and gold do not comprise a “safe investment” or perform well as a means of holding value. Precious metals fluctuate. Of course, that can be a good thing or a bad thing.
If you’re looking for a “safe” investment, silver may not be the option best suited for you. Make no mistake, silver is a speculative trade; a limited, finite resource. It’s used in a great number of industrial applications. Following this logic, one might think that buying silver now and hanging onto it for 30 years is guaranteed to produce a high return on investment.
This strategy is often employed, yet the biggest fluctuations in silver have more to do with politics than market productivity. Trust in the economy - and in world currencies as whole - has a great deal of impact on the value of silver. Generally, the more stable the global market, the less volatile the prices of silver. Conversely, in times of doubt and turmoil, the price of precious metals will often increase. Of course, this isn’t always the case. Historically, silver investments are chiefly made out of a lack of faith in the global economy, and often made as a hedge against a failing world fiat currencies. In the not-too-distant future, however, silver’s revival may be in market faith after all.
As we’ve covered previously, silver has a wide range of industrial applications, including:
Digital media production
Advances in a few of these markets is leaving silver poised for a huge rise in demand - and as the logic of the marketplace holds - a rise in demand leads to a rise in value.
Solar Panels | Rising demand for solar panels is having a major effect on the worldwide price of silver, which could lead to rising solar panel production costs. With the highest electrical and thermal conductivity of all metals, silver is a core element for the manufacture of solar panels. Due to its properties, it is heavily used in solar panels, with around 20g per panel.
Source: Science Daily / University of Kent
Jewelry Demand | A recent survey shows that globally, silver jewelry fabrication demand increased 4 percent year-over-year in 2018 to 212.5 million ounces. While India was the standout performer with an increase in demand of 16%, the U.S. also recorded solid silver sales, with demand increasing 7% percent. This is poised to hit an all-time high of 17.4 million ounces.
Source: National Jeweler / The Silver Institute
Investments | On the opposite end of the spectrum, “safe haven” investing often drives the prices of precious metals. As a lack of faith in world economies grows, so too does the price of precious metals. Many investment advisors in the futures sector forecast leading market players reducing demand for industrial metals, and point towards the “global trade war” between the world’s two largest economies as a factor of dragging economic growth and the catalyst of increased silver future and bullion investment.
There may be some seemingly contradictory information in this article. Some speculation points towards a growth in economy and the advancement of certain silver-utilizing marketplaces. On the other hand, others speculate over economic stagnation and lack of growth. It’s hard (if not impossible) to say who has the more accurately painted picture.
The good news, however, is that either way, silver should see an increase in demand in 2019. Whether it’s through an increase in demand for industrial applications, or as a hedge against world currency, silver is poised to rise.