Trading Silver

You will learn about the following concepts

  • Introduction to silver
  • Pricing factors

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Introduction

Silver is another popular commodity among traders, especially when speaking about the binary options market. But what does make silver, and more importantly silver binary options, so popular, you might ask.

silverSilver’s price, as with every other commodity, is formed on the principle of supply and demand. However, unlike some other commodities, whose demand is one-sided (for example coffee is used only as a beverage, wheat is used solely for food etc), silver has two-sided demand. As a precious metal it serves as a store of value, which means that during times of economic uncertainty, as well as geopolitical turmoil, silver’s price will track gold up.

However, silver’s pricing is also influenced by its industrial demand. The metal is used for the production of jewelry, silverware, and also for industrial fabrication, which includes electrical products and electronics, brazing alloys and solders, photography and others.

This is why silver is often considered to be a good investment for the future. It gains in value when the global economy is in distress, but its price remains underpinned during times of economic boom when the industrial sector is expanding.

As we mentioned above, silver is widely used in the industrial sector, including in the segments of electro-mechanical engineering, electric engineering, aerospace industry, solar industry and automotive construction. During times of robust economic expansion, these sectors are experiencing rapid growth, which will spur rising demand.

Little over 51% of the global silver production in 2013 was mined in only three countries – Mexico, Peru and China. Due to the high concentration of output in these three nations, any social unrest that has the potential to threaten supplies will have an immediate impact on prices. In the meantime, only four countries account for a major part of global consumption. Statistical data show that in 2010, the United States, China, Japan and India had a cumulative demand of around 58%. This in terms suggests that any fears for softening demand, as in economic data pointing to a slowdown, will fan bearish sentiment for the metal.

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