The Key Indicators to Monitor to Predict where the Silver Price is Heading
The price of silver is constantly changing and ultimately it reflects the buying and selling interests in the metal. As the supply of silver, primarily through mining activities is relatively constant, changes in demand will directly affect the silver price in a short period of time. If the demand increases, the supply cannot be increased at the same rate, so the price must increase to allow the market to balance. By understanding where the demand comes from, we can get a better idea of how this will affect the silver price.
Where the Demand for Silver Comes From
Demand for physical silver comes from 5 main areas; industrial applications, photography, jewelry, silverware and silver bullion for investment. Of these sources, most are reasonably stable demands that can be predicted based on historical consumption. Demand for silver for investment however is much harder to predict and subjects the silver price to greater fluctuations in short periods of time.
The demand for silver for investment comes in two main forms; physical silver bullion that makes up the smaller volume of transactions and silver in the form of stocks or 'electronic silver' that is traded in substantially larger quantities. The electronic silver traded each day is actually in huge quantities coming from direct investment in stocks like Exchange Traded Funds (ETF's) or in speculative trades where investors aim to predict where the price of silver will be in the future.
The Stock Market as an Indicator
By understanding the confidence investors have in the stock market, it is possible to predict the demand trend for silver as an investment, which will in turn affect its price. Ultimately it will be the overall performance of the stock market that will indicate investor confidence levels. If the market is performing well, investors will continue to invest in stocks as this is where their return or profit will come from. When the total market drops, this indicates confidence levels are down and investors are selling off their stocks to protect their wealth from losses.
When investors sell off to prevent sustained losses, they must be able to move their money to another investment vehicle, as holding it in paper dollars puts it at a substantial risk of losing value through inflation. Throughout history it has been gold and silver that have been the preferred choice for protecting wealth against economic uncertainty and that is relevant now more than ever. Precious metals have an intrinsic value that protects them against currency debasement and today the potential for capital growth due to increased demand is excellent.
So if you want to predict the overall trends in the price of silver, keep an eye on what is happening on the stock market. If stock prices are down and the outlook for improvement is not good, investors will sell off some of their poor performing stocks from their portfolio and silver is a likely investment option. Increased purchases in silver mean an increase in price and that means a profit to you if you have made an investment in silver already.
Stay in touch with the latest silver prices on our site. The graphs are updated every minute to provide you with the very latest information. We also have charts for the historical silver price going back 5 years.
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