Almost every respected broker offers its clients such a trading instrument as silver (XAGUSD). However, few traders know what factors and events influence silver prices. It should be noted that silver is quite a volatile instrument and often even more volatile than gold. Today, we will discuss what factors to watch for to assess the fundamental side (mid-term or long-term trend) of silver pricing.
Supply and Demand
The basic economic principle of supply and demand plays a significant role in determining the price of silver. Factors such as industrial demand, investment demand, and the availability of silver from mining and recycling all impact its price.
Silver is widely used in industrial applications, including electronics, solar panels, and medical devices. Changes in industrial demand can, therefore, have a direct impact on the price of silver.
Like other precious metals, silver is often seen as a safe haven investment during times of economic uncertainty and inflation. As a result, investor sentiment and macroeconomic factors can influence the demand for silver as an investment, affecting its price.
Silver is traded in US dollars, so changes in the strength of the dollar relative to other currencies can impact the price of silver. A weaker dollar typically leads to higher silver prices, as it becomes cheaper for holders of other currencies.
Political instability, trade tensions, and other geopolitical events can affect the price of silver. Uncertainty in global markets can drive investors towards safe-haven assets like silver, raising its price.
Inflation and Interest Rates
Inflation and changes in interest rates can impact the price of silver. Higher inflation and lower interest rates can increase the appeal of silver as a hedge against inflation, driving up its price.
Changes in silver mining production, which can be influenced by factors such as labor strikes, mine closures, and new discoveries, can affect the overall supply of silver in the market and, consequently, its price.
Government policies, such as tariffs, regulations on mining, and changes in tax laws, can impact the cost of production and supply of silver, thereby affecting its price.
The economic calendar events that most influenced the silver price include:
Changes in factory orders can impact the demand for silver, especially in industries that use silver for manufacturing purposes.
Industrial production levels
Industrial growth tends to increase demand for industrial metals, which also includes silver. As a result, this leads to higher prices. Conversely, a decline in industry or in the Manufacturing PMI indicates a decrease in production and lower demand for industrial metals.
Trade data, such as import and export figures, can affect the demand for silver in various industries, especially those involved in international trade.
CPI and PPI Reports
Inflation reports provide insights into the overall economic conditions and can impact the demand for silver as a hedge against inflation.
Nonfarm Payrolls (NFP) Report
The monthly US employment report, specifically the nonfarm payrolls data, is closely monitored. Positive job growth can be an indicator of economic strength, affecting investor sentiment and potentially influencing silver prices.
Gross Domestic Product (GDP) Releases
GDP reports provide insights into the overall health of an economy. Strong economic growth may boost industrial demand for silver, while economic downturns could lead to lower demand.
Correlation with gold
Gold and silver often exhibit a strong correlation due to their shared characteristics as precious metals. The correlation is not constant and can vary over time. But in general, these 2 instruments walk in tandem most of the time.
Precious Metals Futures and Options Expiry Dates
The expiration of futures and options contracts can lead to increased volatility in silver prices as traders adjust their positions.
Mining Reports and Production Data
Reports on silver mining production and supply levels can impact silver prices. Any significant changes in production levels or disruptions in mining activities can affect the supply-demand dynamics.
Which countries are the largest producers and consumers of silver?
Largest Producers of Silver:
- Mexico is the world's largest producer of silver, with a significant portion of its mining output coming from mines such as Fresnillo and Saucito.
- Peru is another major silver-producing country, with mines such as the Antamina and Yanacocha contributing to its output.
- China's silver production is substantial, with the country being a significant player in the global silver market.
- Russia has substantial silver reserves, and its mining activities make it one of the significant contributors to global silver production.
- Chile is known for its copper production, but it also produces a notable amount of silver as a byproduct of its mining operations.
Largest Consumers of Silver:
- The United States is one of the largest consumers of silver, with demand stemming from industrial applications, jewelry, and investment.
- India is a major consumer of silver, with significant demand for silver jewelry and silverware.
- China's industrial growth and jewelry demand contribute to its status as a significant consumer of silver.
- Japan has a well-established industrial sector that utilizes silver, contributing to its consumption in the country.
- Germany is also among the largest consumers of silver, with demand arising from industrial uses and investment.
What public companies traded on the US stock exchange are involved in silver mining?
- Newmont Corporation (NYSE: NEM)
- Wheaton Precious Metals Corp. (NYSE: WPM)
- Hecla Mining Co. (NYSE: HL)
- Pan American Silver Corp. (NASDAQ: PAAS)
- First Majestic Silver Corp. (NYSE: AG)
- SSR Mining Inc. (NASDAQ: SSRM)
- Fortuna Silver Mines Inc. (NYSE: FSM)
- Coeur Mining, Inc. (NYSE: CDE)
- Endeavour Silver Corp. (NYSE: EXK)
- MAG Silver Corp. (NYSE: MAG)
Analyzing the financials and reports of these companies will provide additional insight into the precious metals mining industry and volumes.
What are the ETFs that include silver?
- abrdn Physical Silver Shares ETF (SIVR)
- iShares Silver Trust (SLV)
- Invesco DB Silver Fund (DBS)
- Sprott Physical Silver Trust (PSLV)
- Global X Silver Miners ETF (SIL)
- ProShares Ultra Silver (AGQ)
- ProShares UltraShort Silver (ZSL) - reverse ETF!
These ETFs provide investors with exposure to the silver market and can be used to track the performance of silver prices.
What are the Top-10 silver mining spots and the companies that own them?
|Silver Mining Spot
|Tahoe Resources Inc.
|San Cristobal, Bolivia
|First Majestic Silver Corp.
|SSR Mining Inc.
|Golden Minerals Company
It's important to note that while these factors can have a significant impact on silver prices, market sentiment, technical analysis, and other factors also play a role in determining short-term and long-term price movements. Traders and investors often use a combination of these factors to make informed decisions in the precious metals market.