Sterling silver is highly popular among consumers and designers. It is used in many different products, including jewelry, musical instruments, and silver tableware. Sterling silver consists of 92.5% silver and 7.5% copper. The silver gives it its resilience and shine, while the copper ensures a strong foundation. Silver bullion has become an investment asset for many individual and retail investors. It is even held by some central banks.
Like the price of many other commodities, the price of silver is determined by the market forces of demand and supply. It is also affected by speculation, market conditions, hedging, and gold prices.
Let’s look at some important factors that affect the price of silver.
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Factors Influencing Silver Price
Investors
As compared to gold, the silver market is much smaller due to its low price. This makes it relatively easy for institutional investors and large traders to influence the price of silver.
For example, in 1997, Warren Buffet invested $585 million in silver by purchasing 130 million troy ounces at $4.5 per troy ounce. There are many examples like this in history where large traders or institutional investors moved the market price of silver.
Demand
Silver has more applications than gold, and in the last 10 years, 1 billion ounces of silver were used to produce consumer products. Besides jewelry and silver tableware, silver is also used in motor vehicles, televisions, computer electronics, and coins, among many others.
Recent 2022 reports suggest that silver demand is expected to rise to 1.1 billion ounces and supply will also rise by 5.3% as the mining industry rebounds from the disruptions caused by COVID-19.
Demand is affected by many factors, including economic trends. For example, income determines an individual’s purchasing power. If the person’s income decreases, they will stop buying luxuries like watches, jewelry, and other products that use silver to fulfill their necessities like food, water, and shelter.
Another important factor affecting demand for silver is interest rates. When interest rates rise, investors prefer interest payments over the long-term asset (silver).
Supply
The supply of silver also influences its price. For example, a labor strike interrupting the mining of silver at a major producer will cause a spike in the price of silver. However, supply disturbances are short-term effects and can ease out in the short run.
Hedging
Many households use silver as an investment asset to hedge themselves against inflation. There is an inverse relationship between the price of silver and the USD index.
When the country is experiencing inflation, the USD index goes down. However, the price of silver goes up as people start to invest in and buy more silver.
Gold Prices
If you track the historic prices of gold and silver, they are somewhat related. As the price of gold rises slowly, silver prices tend to follow. But when the price of gold drops, the silver price falls by a greater margin.
There is a lot of debate around the relationship between the prices of silver and gold, but in general, they do have a correlation.
Technology
During the times of film photography, a lot of silver was consumed to develop the photographic images, which drove the prices of silver up. However, the technology soon died and innovations led to digital cameras, and consumers started to prefer digital images.
Government Policies
Since silver has a long history of being used as a medium of exchange, some central banks still buy and sell bullions.
The US Mint is one of the largest consumers of silver as they buy silver to produce bullions and coins, which they then sell on the market to people who are looking to invest.
Calculating the Value of Silver
To determine the value of silver, you need to know how many ounces of silver you have.
Weigh your silver and record the weight. Some weight scales will give you grams as a unit of measurement, which you need to convert to ounces. A single ounce is 28.349 grams. Let’s look at an example first before moving on.
If you have 35 grams of silver, that’s about 1.23 ounces. You take 35 grams of silver and divide it by 28.349 grams to get the number of ounces of silver you have.
Now that you have the weight of silver in ounces, you need to multiply it by the current spot price of silver. This figure can be easily found on reputable investment websites. Currently, at the time of writing, the price of silver is $21.07 per ounce.
To know the value of the silver you have, you multiply the $21.07 per ounce with the 1.23 ounces, which gives you a value of $25.91 for your sterling silver.
With these steps, you can easily calculate the value of your silver. It is much easier to have a weighing scale that uses ounces as a unit of measurement so that you don’t have to go through the extra step of conversion.
