With prices bouncing between $4 and $20 per ounce over the course of the last decade, the silver market has earned the status of one of the most volatile metals to trade.
The silver price tends to follow that of gold, and to a slightly lesser extent that of copper, but as the market for the grey metal is much thinner than either the gold or the copper market, the link with the other two metals is occasionally broken because of speculation.
Investors interested in trading the silver market should keep a close eye on the main producers of the metal such as London-listed Mexican miner Fresnillo, Australian mining giant BHP Billiton and Polish company KGHM Polska Miedz. Announcements of annual production levels, mine openings and closures or mining disruptions will all have a significant effect on short-term prices.
Although most people traditionally think of silver as a jewellery metal, twice as much silver is used for industrial purposes as for fashion. Silver is a component in mobile phones, medical applications and batteries. Monthly indicators of industrial demand and manufacturing for major industrial regions such as the US and the eurozone will provide a good signal for where the silver market is likely to move next.
Silver is traded in the form of futures on the Comex exchange in the US or over-the-counter in London where prices are fixed once a day by a group of market-making banks.
The daily pulse of the silver futures market can be taken by looking at the Comex inventories and contract open interest – the total number of outstanding contracts held by futures markets participants at the end of each day. Longer term data such as demand and supply statistics is provided by the Silver Institute, a miners’ association based in Washington.