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What Affects the Price of Silver?
The silver market changes all the time and seems to follow the path of a toddler. How can we even begin to follow if we have no idea what leads it?
Silver is a chemical element with the chemical symbol AG. This comes from the Latin word argentum, meaning "white" or "shining." Silver is generally a soft metal, so it is often alloyed with other metals like copper to make it stronger. It has been valued as a precious metal since being discovered and is used for decorative purposes, coins and also industrial purposes such as in electrical conductors and computers.
Trading markets for silver
Silver is traded primarily in two major markets: New York and London. Silver is substantially cheaper than gold, and at one time it traded at 1/6 to 1/12 the price of gold, although as of 2010 that ratio is closer to 1/80. Trading is conducted in these markets based on future delivery, meaning the silver has to be delivered in several days so the trading is not cumbersome. London has the largest market.
Strengthening of the U.S. dollar causes silver to decrease in value, while weakening of the dollar causes silver to rise in value. People look to bullion such as silver as a hedge against inflation. When people lose confidence in the dollar as a sound store of wealth, they turn to bullion such as silver.
Increased demand for industrial or jewelry
Another factor that increases or decreases the price of silver is demand. While the supply of silver is stable, demand can ebb and flow and at times--or it can increase to the point where silver goes up in value. As of 2010, the popularity of Exchange Traded Funds (ETF) for silver has been considered a reason for silver's recent rise in value. ETFs have to keep physical deposits equal to investments in the fund.
General global woes
Beyond the U.S. dollar or increased demand for silver, global uncertainty can drive up the price of gold and silver. As countries worry about deflation, or expansion of the monetary base, they turn to other stores of wealth like gold and silver, which increases demand and subsequently increases the price. For example, while stocks dropped nearly 50 percent in 2008, precious metals dipped less than 20 percent and actually went up in value even when stocks fell.
Read more: What Affects the Price of Silver? | eHow.com http://www.ehow.com/