What Determines the Spot Price of Silver?

The spot price of silver is the price that is quoted for immediate payment and delivery. Settlement and delivery of a silver transaction carried out at a spot price is usually executed within one or two business days. The spot price for silver is influenced by a number of factors but at the most fundamental level is purely a function of supply and demand. COMEX, a division of the New York Stock Exchange and the London commodities market are the preeminent markets whose prices for silver are used as a basis for trading, buying and selling all over the world.

Precious metals like silver, gold, platinum, and palladium are actively traded in many commodities markets around the world. The spot price of silver is set by these markets. It varies hourly according to supply and demand. As the worldwide demand for silver increases, the price goes up, and as demand goes down, the price follows. For non-perishable commodities like silver, the price is also influenced by market speculation on how supply of and demand for the commodity will change in the future.

This very basic economic relationship is influenced by a number of factors, many of which are unique to a small group of precious metals because of their status as tangible assets and as a store of value. This is true even though many world currencies that were once backed by precious metals no longer use this method of guarantee. The worldwide economic climate has a major effect on the price of silver. When economic trends are on a downturn, many people turn to investments in precious metals, increasing demand and driving up prices. Inflation of major world currencies can also affect the spot price of silver.

Factors such as the opening and closing of mines, strikes of mine workers and increased or decreased production of large mines can all affect the spot price of silver. World governments can influence the price of silver by buying or selling large quantities of the metal. During the 1950s, the United States sold large amounts of silver in a successful effort to keep the market price down. This was done to try to keep the market price of silver below the monetary price of silver in the United States.

Manufacturing demand for silver is another major factor in determining the spot price of silver. Silver is used in a number of industrial and manufacturing sectors including the electronics and health care industries as well as photography and the manufacture of batteries, solar power equipment, mirrors and tableware. Many other products and industries also use of silver and their use of the metal has a direct effect on demand and, thus, the price of silver.