Trading silver

silver coinsTrading Silver

For thousands of years people have been trading silver. The precious metal is also known as “poor man’s gold” and has been in use for making jewellery and as a form of money for many centuries now. Today silver is also an important industrial metal that has many applications. It is being used in household appliances, batteries, solar panels, electronic circuits, etc.

Silver is one of the most popular metals among daytraders and is enjoying a solid crowd of followers. The reason that silver is so popular with traders is that it is highly volatile. Much more volatile than big brother gold. The correlation between the price movements of silver and of gold is large (about 95%). So the silver price follows largely the price of gold. However, the up and down swings are much larger.

How to trade silver

The easiest way to trade silver as a private person, is through an online trading platform. One of the possibilities then is to use cfd's. How does a cfd work? You can read here: What is a CFD? With CFDs you can (you don’t need to) trade with leverage. The size of the leverage you can determine, up to a certain limit, yourself.

To start trading silver yourself, we can recommend a few reliable and well respected cfd brokers:

AVATRADEAvatrade is a highly professional forex CFD broker that offers traders a lot of possibilities. They use their own advanced AGM-trader trading platform, but one can also opt for the internationally acclaimed MetaTrader 4 platform.

Plus500: One of the best known cfd brokers in the world. Provides an easy to use trading platform with plenty of opportunities for starting traders.

*Risk warning: 80.6% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money

Plus500UK Ltd authorised & regulated by the FCA (#509909). cfd broker with excellent service and support. They offer a Trading platform with enhanced capabilities. Also great for the more advanced trader.

eToro*: eToro is one of the most innovative cfd brokers on the market. Traders at eToro are treated to a wide range of services and capabilities which can be made use of.

*75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money

Relationship between the gold price and silver price

Gold is a lot more expensive than silver. The value of gold and silver with respect to each other varies historically between 20 to 70 ounces of silver for 1 ounce of gold. This ratio always fluctuates and silver traders use it to determine when to sell silver and buy gold, and vice versa.

Pricing silver 

Silver is traded in different degrees of purity (.9999, .9995, .9990, etc.) on various commodities exchanges in the world. The exchange best known and most followed is the COMEX in the U.S.. There is also a large commodities exchange in India where silver is traded.

silver barsThere are several factors that influence the silver price. The first is the industrial demand. As indicated earlier, silver has many applications. It is used in so many products that we use every day without us knowing it. As a result, the price of silver acts cyclical. If the world economy is doing well, then the industrial demand increases for the precious metal. Conversely, in a poorly performing global economy, the demand for silver decreases.

Of course, also the supply side has its effect on the silver price. The two main sources of silver that comes on the market are scrap-silver and new silver which is extracted from mining. scrap-silver is recycled silver from all kinds of products, but also from people who sell jewelery and silver items when the silver price is high.

The silver which comes from mining is onlyfor 25% coming from silver mines. The majority is recovered as a byproduct from mines that focus primarily on other metals such as gold, copper and zinc. The largest producer of silver in the world is Mexico, with about 15% of world production, followed by Peru, China and Australia. Sometimes mining companies temporarily store their silver in times when the price is very low, only to sell it when the price is high.

Another important factor in the pricing of silver is the dollar. Silver is worldwide traded in dollars. If the dollar drops in value, then the price of silver in dollars rises, while the price in euros may stay the same or even decline. In addition, silver is, like big brother gold, seen as a safe haven. This applies in times of geopolitical unrest (war), but also by currency turmoil and insecurity (fear of falling exchange rates, inflation) people flee in precious metals as a safe haven.