Trading Silver
(XAGUSD)

An introduction to Silver

Silver may not be as expensive as Gold, but over the years it has held its value just as well, and at times even better than Gold. Silver is a both a precious metal and an industrial metal, which means the dynamics of the Silver market are complex, and numerous trading opportunities can arise.

Factors influencing price of Silver

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The Silver market is even more complex than the Gold market. The Silver trading price is influenced by the same dynamics that determine the price of Gold, however because Silver is used in several industrial processes there are a few differences.

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Silver supply comes from mines and scrap metal, both of which are dynamic industries. The cost of mining for Silver is rising as the remaining Silver deposits are found deeper and deeper. Low Silver prices lead to lower production, while higher prices leads to higher production.

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Silver was historically used in photography, though this demand has fallen with the advent of digital photography and new printing methods. In fact, silver is now being reclaimed from old photographic film and paper. Silver is also being replaced with cheaper substitutes in older technologies. However, Silver is now also being used in new technologies, including solar energy technologies. The bottom line is that Silver is slowly but surely being used up, something that makes it a reliable store of value.

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Like Gold, the Silver price is also influenced by factors that drive the strength of the US dollar, and the risk appetite of global investors. Silver is a safe haven asset, and the price rises when investors become risk averse.

Advantages and Disadvantages of Trading Silver

Advantages

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Silver is one of very few safe haven assets which are negatively correlated with most other assets.

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Silver is both a precious metal and an industrial metal, which makes for a dynamic market.

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The use of Silver in solar energy applications will lead to interesting opportunities as that market grows.

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Traders can profit from rising and falling prices.

Disadvantages

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Trading physical Silver requires transportation and insurance. Fortunately, EightCap offers Silver CFDs which makes trading simple and cost effective for retail traders.

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The Silver market is complex, and a significant amount of research is recommended to stay up to date with its current influences.

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Reading a Silver chart

The Silver commodity price has closely tracked the Gold price over the last two decades. The price experienced a multi-year bull trend between 2001 and 2011, though it did fall sharply in 2008 during the Global Financial Crisis.

After the GFC, Central Banks embarked on a period of quantitative easing, which propelled the Silver price to new highs due to speculation about rising inflation. The Silver price hit a multi-decade high of $49.66 in 2011, when global equity markets corrected sharply. Since then the world has experienced periods characterised by very low market volatility, and lower than expected inflation. This has led to a bear market for Silver.

If volatility or inflation return to world markets, the Silver price could rise again. If not, the bear market may continue.

How can I trade Silver online?

EightCap offers CFDs on the Silver price, one of the most straightforward methods of trading the precious metal. To learn about trading Silver, you can open a live or demo account with EightCap and begin following the Silver spot price ticker and the Silver market news.

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It’s free an it takes less than 2 minutes

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