How Much Is Silver Worth?
How Much Is Silver Worth?
Silver is a precious metal — like gold but without the hype. Silver has been used for thousands of years as a store of value and an industrial metal with practical applications. Silver money has existed for at least four thousand years and was once a major part of the American financial system, though its use in legal tender faded out in 1970. How much is silver worth?
The current market price for silver, as of this writing, is $17.63 per ounce. Because financial markets fluctuate rapidly, the current price as you read this is certain to be different. For a current market value of silver, check out this live market quote.
How is the Value of Silver Determined?
The price of silver is determined by a number of factors and fluctuates widely because of its use in industrial settings as well as its status as a store of value. Demands made on silver by industrial and financial markets are the two main determining factors in the value of silver as a commodity. Any commodity that has a value that fluctuates like silver and is traded on financial markets is called “volatile”, and for good reason.
Looking back 150 years, the value of silver was once quite low. In a year when gold was trading at an average of $20 per ounce, silver (in 1860) was only worth about $1 per ounce. Gold has always had a higher value than silver, and because these two precious metals are so closely linked (both in financial markets and industrial settings) comparisons are often made between the two. There’s even a statistic in the financial world known as the “gold / silver ratio” that helps track the relative value of each material.
Why does silver not trade as high as gold? That gold/silver ratio (often used by traders and investors to determine a proper buy level for both) indicates that investors have always “felt better” about an investment in gold. The average gold/silver ratio during the entirety of the 20th century was 1:47, meaning that an ounce of gold was worth forty-seven ounces of silver.
Private investors drive the market value of precious metals, including gold and silver. As with any commodity, attempts to corner the silver market have driven the price up and down especially towards the end of the 20th century. A group of investors attempted to literally corner the market on silver in the 70s, and at one time these investors (the Hunt brothers) reportedly owned over 100 million ounces of silver. Changes in investment rules broke up the Hunt brothers silver run, but not until their tactics drove the value of silver to an all-time high (at that time) of over $16 per ounce.
Industrial demand is the other large factor in determining the value of silver. Silver is used to build everything from basic electrical appliances to the most complex medical technology, and the use of silver has increased in the industrial world since 2001. This is mostly because of the use of silver in batteries for things like laptops and cell phones, superconductors, and computer microcircuits. This increase in non-investment demand makes silver a smart investment — since it is being used more and more in industry, it has become a safer commodity, not as heavily affected by the fluctuations of financial markets.
One factor that some silver investors worry about is the switch from silver halide based photographic film to digital. How many people even use print film anymore? Though the impact of the switch to digital photography has made an impact, the continued use of silver in new applications has pretty much offset the drop in value.
How to Invest in Silver Coins and Bullion
When you invest in silver, you have the option of buying actual silver bullion. These “bars” of silver are the traditional way to invest in physical silver. Silver bars and silver coins are often kept in safes, safe deposit boxes, or placed in storage at a bank or with a commodities dealer. When you buy bars or coins of silver, you’re investing your money in what you hope is a relatively safe commodity, one whose use in commercial products and whose historial use as currency won’t necessarily be affected by nightmare on the stock market. Investing in precious metals is seen as another way of diversifying financial investments — rather than sinking all your money into real estate or the stock market, you can invest in solid silver.
Some people prefer to invest in silver as an ETF, or exchange-traded fund. This is a good way to invest in silver without the necessity of purchasing and storing physical silver, though the benefits of investing in silver as a way to avoid the ups and downs on Wall Street are lost when you’re talking about ETF investments. Basically, when you invest in an ETF of a precious metal, you’re investing in a company whose business is purchasing, storing, and trading in physical silver. Think of an ETF as a way to “hedge your bet” on this precious metal commodity.
Investing in a company that mines silver is another, less obvious way of investing in silver. Buying shares in silver mining companies is a good way to diversify your commodities investment, as silver mining companies do not exclusively deal in silver. Silver deposits exist alongside deposits of other materials such as tin, lead, or copper. Thus, shares in silver mining companies are also generic “metal investments”, meaning your money could be a bit safer than money sunk into a single commodity investment. There are also precious metal mining mutual funds that invest in multiple mining companies, further protecting your financial investment from chaotic ups and downs.
Investing in precious metals is becoming more and more popular thanks to dozens of commercials advertising the sale of gold — as people get interested in trading gold, they learn more about precious metals trading in general. With the current economic downturn and an uneasy feeling about the future of investments in corporations, money sunk into precious metals is growing, and thus the value of silver and gold is growing as well. The future of silver investing depends on its use as a store of value and an industrial commodity.
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This entry was posted on Saturday, July 24th, 2010 at 5:22 am and is filed under Money. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.