Invest In Silver? – What Is The Case For Silver?
This post is the first in a series on silver. The price of silver is often heavily correlated with Gold Prices but the precious metals are driven through a range of differing global factors. It’s important for investors to gain an understanding of what affects silver and gold prices and gain an overall perspective. This post is not intended to provide investment advice but looks at some of the factors that can differentiate gold and silver prices.
Silver Demand From Industry
Gold is used in industry but not to the extent of Silver which has its primary usage in this area. Silver is viewed as an integral component in virtually all industries. Here are a few of the uses:
- Membrane switch panel contacts.
- Elevator buttons.
- Silver oxide and zinc batteries.
- Electrical switches
- Chemical producing catalysts
- Silver contacts in circuit breakers
The following info-graphic covers the uses and gives projections of future silver usage in industry.
Silver Usage Trends
Silver has the potential to offer protection from deflation in a similar vein to gold it also has many uses in industry. One obvious reason for this is that silver is cheaper. There is one other related factor that distinguishes silver here; the bias towards industrial utilisation means that silver can disapear like other commodities including oil. This kind of consumption has less of an effect on all of the gold in the world but the silver’s characteristics and usage trends mean this is something of a dominant factor.
Silver Gold Correlation
Over recent years, the price of silver has seen a strong correlation with Gold, moving higher and lower, but with more exegerated volatility than the price of gold. Much of this comes down to supply and demand. The silver market is not nearly as big as the gold market in terms of absolute liquidity. The London bullion market has around 18 times more money traded in gold than silver on a daily basis. This is one of the reasons behind the highly volatile movements in silver. The gold market can absorb much more of the supply and demand swings than the silver market.
Keep checking back for the next installment in “Invest In Silver? - What Is The Case For Silver?”.