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Silver is a significant precious metal that is relevant to both industry and financial investors alike. Fluctuations in the metal's price are frequently caused by fluctuations in supply from silver mines. However, this is not the only major factor that influences the prices of silver. In fact, there are a plethora of factors that can influence the price of silver.
The most significant factor that determines the price of any commodity is the interaction between the demand and supply of a product. Hence, this implies that fluctuations in the demand or the supply of silver can cause the prices to change. One major issue the silver industry faces is the scarcity of supply coupled with increasing demand. This leads to a shortage in the market, which causes prices to increase. The greater the fluctuations in demand and supply become, the more volatile the market is. The Silver scrap market can also influence the demand for silver. When the silver price increases, many silver owners will scrap jewellery or goods that contain silver in order to extract the value from the metal.
Enhancement in technology is also another trigger that can lead to changes in the prices of silver. Many newfound technologies use silver. These include technologies including cellular phones and solar panels. Its demand in the photovoltaic system is also a factor that has caused an increase in the prices of silver.
Micro economic factors can also impact the silver price. During periods of increased wealth, more people are willing to invest in valuable items. However, if they are faced with economic recession, then these metals are the first things to be sold. This demonstrates that the economic conditions are highly influential in determining the prices of silver.
Macro-economic trends are also a triggering factor because metals like gold and silver are considered to be a safe haven for investors. Any fluctuation in investment trends can cause the prices of silver to rise or fall. Inflation is an increase in the price level which in turn erodes the value of paper money. Therefore, to combat this problem, investors select to invest in silver as it is a safe hedge against inflation. The relationship between the US Dollar and the silver price can also create silver price fluctuations. They have an inverse relationship. Silver prices normally strenghten with a weakening US Dollar.
The price of silver and gold are interrelated and if the price of gold increases or decreases then the silver price will normally follow. Governmental policies and interest rates can also affect to the priceof silver.
In conclusion, there are a large number of factors that can affect demand for silver. It is important for silver investors to stay aware of these factors as they can help to determine when it is a good time to buy or sell silver bullion.