Silver Prices Per Ounce

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In many peoples’ eyes silver prices per ounce are tagged to and influenced by the price of gold, and many people see silver as no more than gold’s poor relation. With the gold silver ratio averaging 37 to 1 over the past two hundred years it may seem foolish to suggest to anyone to buy silver instead of gold for investment purposes.

So the question is, given the present scenario and prevailing market conditions, is now the time to invest in silver for better returns?

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Demand For silver

Unlike gold, silver has many industrial uses and these are on the increase.  For example silver wires are used to carry electricity, solar panels take advantage of silver’s reflective properties and batteries are increasingly being made of silver. But it doesn’t end there – silver is becoming increasingly important in the chemical industry and its anti bacterial properties make it popular and in high demand in the medical industry. The manufacturing industry is increasingly using silver as a key component too.

So a large chunk of silver is used in industry each year and of course this portion is not available for trading and investment purposes.

Scarcity of Silver

Silver is mined from the ground along with several other metals like copper and tin. The amount of silver available in mines is reducing every year. As this amount diminishes the forces of demand and supply cut in. As the supply diminishes and demand grows silver prices per ounce will inevitably increase. It is the industrial demand referred to above that gives silver an advantage over gold and suggests that over time rises in the price of silver could outpace those of gold.

Canadian mint’s Silver Maple and US mint’s Silver Eagle are sought after investments. This exemplifies the fact that silver is becoming a scarce metal. Mints across the globe are facing difficulties in supplying silver coins and all this inevitably has a bearing on the silver market price.

It could be argued that silver prices today do not reflect the importance of silver as a potential investment option, given its dual role as a precious metal and a sought after industrial commodity.

With this ever increasing demand for silver one could be forgiven for expecting the price of silver to have risen even more dramatically than it has in recent years. But the factors that have stimulated demand have to be balanced against the world economic situation which has been holding back the growth in GDP of most countries in recent times. Had it not been for that who knows what heights silver prices per ounce might have hit by now!

Nevertheless silver prices today still dwarf those of even a few years ago…

Silver Prices Per Ounce – A Meteoric Rise!

The silver market price has increased at a rapid rate in the past two years (2009 – 2011). It has risen from around $15 per ounce to over $40 per ounce and during this meteoric rise it got close to its all time high of $49.45 per troy ounce at one point before falling back.

This is a jump of more than 250 percent. So had you invested your money in silver a couple of years ago, your investment would have gone up in value two and a half times in just a matter of 24 months.

At the same time stock markets worldwide showed insignificant growth in comparison and returns from bank deposits in the same period have been at all time lows.

Changing Habits

Another major reason for this strong upward surge in price has been the change in the buying trends of people from the Middle and Far East. These folk have traditionally considered gold as the preferred investment option and have previously put their faith in this metal. But as things stand now, gold prices have increased to magnanimous proportions to such an extent that gold has gone beyond the reach of a lot of people.

Many of these investors have shifted their focus to silver instead. So with small investors gravitating towards silver, the impact has been huge on the demand for silver and on silver prices per ounce. The trend has also caught up in the West with the dealers reporting increased demand for silver.

Buying Silver

There are different ways that you can invest in silver.

The most common form of investing in silver is by buying silver bullion because the price is relative to the spot silver prices. You can buy silver bullion in the form of coins minted by the government. These coins, such as Silver Eagles, hold the advantage of coming with a guarantee for purity and weight.

You can also invest in silver bullion bars. If you buy bars from auction sites such as ebay.com, it is best to trade in one and ten ounce bars. This is because the bigger 100 ounce bars can be easily counterfeited. They can be filled with lead inside and there is no way of knowing this until the bar is broken in half.  But if buying from a mint, a certificate is attached to it proclaiming its authenticity.

If investment is the only aim you can also consider the option of exchange traded funds or certificates. This way the cost of purchase is lower and you don’t have to worry about delivery and storage.

Conclusion – Prospects For Silver Prices Per Ounce

Following the huge increase in silver prices per ounce over the past couple of years a correction is always likely in the short term.  But with demand for silver only likely to increase over time and the paradigm shift in the way small investors now perceive silver compared to gold the upwards surge in prices is likely to continue in the medium to long term.

Actually it could be argued that you simply can’t afford NOT to be investing in both silver AND gold right now. Billionaires and millionaires worldwide are diverting their wealth into precious metals at an unprecidented rate. Do you think they might know something you don’t? Everyday folk should be following their lead.

If you’re ready to discover why this is happening and how you too can take advantage of this huge opportunity to protect your wealth and future prosperity before it’s too late, then the next step you must take is to enter your contact information into the form below.

You’ll then be sent a free investors kit and one of the precious metals specialists will contact you to answer all your questions and help you get started. So enter your contact details now and then congratulate yourself for taking that first step towards securing the future for yourself and your loved ones. (Note: You will NOT be put on a Mailing List and the only contact you will receive will be from the precious metals specialist).

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Introduction

The gold silver ratio, i.e. the average correlation between gold and silver prices, has been somewhere in the range of 37 to 1 for the last two centuries.

August 2011 saw huge swings in stock markets worldwide and this reflected in the volatility of gold and silver prices, with changes of up to 5 percent recorded some days. It remains to be seen where the markets are headed but speculation is rife that recent corrections in the price of gold and silver are only temporary and the overall upward trend will continue.

The live gold and silver prices at the time this article was written (end of August 2011) were $1786 per ounce and $40.68 per ounce respectively, giving a ratio of 44:1. This is quite near to the historic average.

Recent Gold Silver Ratio

Between 2009 and 2011 the ratio between the price of gold and silver fell pretty fast. Previously the average was ranging between 60 and 70. But over time the global demand for silver has increased. In many cases it has even replaced gold as a viable investment option as the high gold price has become a deterrent for some investors.

Although gold prices have also risen during this period, it has not been able to match the huge upwards strides in silver prices.

During this two year period there have been occasional corrections but the overall trend in silver and gold prices has been sharply up. But the percentage increase in silver prices has been much higher, leading to a lower gold silver ratio.

Short Term Prospects For The Gold Silver Ratio

The fact that traditionally the gold buying period has just started could change this trend in the short term. The festival season is just round the corner and this is a traditional time for major gold purchases. The present giving season is about to start and this normally results in a large amount of gold being bought and sold. During this period the maximum sales of gold take place and the gold silver ratio is traditionally higher.

This coincides with the harvest season in the eastern part of the globe which gives more spending power to everyday folk. People in these parts, especially India, like to invest in the so called safe havens of gold and property and this is the time when the majority of the gold is bought for private ownership. Thus gold sales are historically higher in the September to December period higher which often leads to a short term increase in the gold silver ratio.

Factors Influencing Gold and Silver Prices

The Chinese middle class has also started investing in gold as a form of financial security over the last five years. Due to the sheer volume of people involved Chinese buying patterns are highly influential in deciding where the markets are headed. With 1.2 billion Chinese, and with the middle class forming 25 percent of the population, an entire United States equivalent is buying gold in China.

Another major factor affecting the price of gold is the demand that has come in from central banks. These are long term demands and are not sensitive to gold and silver prices. Their aim is to enhance their nation’s gold reserve content.

A further factor supporting a rise in the gold price is the fact that it has a global appeal. If at any point in time the validity of the US Dollar is questioned, then US dollars will be partially backed by gold bullion. Silver doesn’t even figure in this scenario. So gold, in all probability, will not go out of fashion at least as things stand now. There might even be a scenario where it may outpace silver and again tilt the gold silver ratio in its favour.

Silver on the other hand has many other factors going for it. Its industrial uses in the fields of photography and medicine have increased its demands by a huge margin. Its anti-bacterial properties have caught the fancy of many scientists and researchers leading to more requirement of this metal for its commercial use. Along with gold, the Chinese are also dealing in huge quantities of silver for these very purposes, pushing silver prices per ounce still higher.

Gold, which industrially is being used only in the form jewelry, faces the prospect of going out of fashion if it reaches levels that are beyond the reach of the middle classes. This works in silver’s favor.

Outlook

Taking all the above into account no one can be sure which commodity will tower over the other, but the overall consensus of opinion is that gold and silver prices are set to rise still higher over the medium to long term.

So is now the right time to buy for the patient investor? It could be argued that analysis is suggesting that if an investor is looking for some big returns in the short term, silver could be the metal of choice. Many signs point towards a surge forward. On the other hand gold has passed the test of time as a long term investment and it is difficult to foresee this metal being dethroned as the connoisseurs’ choice. Therefore, gold and silver prices are expected to continue the dream run and benefit the staunch believers.

Gold Silver Ratio – Conclusion

Due to the gold silver ratio being 44:1 at present (August 2011), silver is being hailed as the poor man’s gold. Many countries have started using it in lieu of gold even for investment purposes. All this has led to an ever increasing demand for silver and many traders are forecasting that silver will outplay gold at its own game and that the ratio in gold and silver prices will decrease – even though gold & silver prices individually are likely to continue to rise.

Did you know that billionaires around the world are ploughing their money into gold and siver like crazy at the moment? Get the inside story here

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Prevailing silver prices per ounce have generated a lot of interest for silver as an investment opportunity and therefore serious investors should get to know all they can about this valuable commodity.

Like all other precious metals, people from all over the world invest in silver. In the past it has been a form of money, however, it ceased to be a legal standard in the United States of America when the Silver Standard ended.

Its primary uses have changed in the course of history. From being a form of currency, demand for silver in recent times has come from its industrial applications, bullion coins, jewelry and exchange traded products.  Together, these have contributed to a steady increase in silver bullion prices.

ABOUT THE PRICE OF SILVER

Like all commodities, the spot silver price is driven by speculation and the forces of supply and demand. Traditionally silver prices per ounce are notorious for being volatile. There are two main reasons for that. Firstly, silver has a low market liquidity which leads to easy access to the everyday person. Secondly, due to its two pronged uses (industrial and as an investment option), the demand fluctuates between the two causing price instability.

Over the last century the price of silver has increased steadily. From prices of around 0.64 US$/ozt at the beginning of the 20^th century, silver prices today are in the region of $40/ozt. Most of this appreciation has taken place in the last five years or so and prices have more than doubled in the last year.

In 2005 silver was priced around 7 US$/ozt. By 2010, it had risen to 20 US$/ozt. The price rise was of a zigzag nature during that period and there were temporary dips amid the overall upwards surge due to the worldwide economic crisis which badly affected the entire financial world. This rise in the past few years has largely been attributed to concerns regarding inflation and bailouts.

Traditionally silver has been seen as the poor relation of gold. But with these dramatic increases in the price of silver of late there is now much debate about whether silver prices per ounce will rise faster than gold henceforth.

WHAT AFFECTS SILVER PRICES PER OUNCE?

Industrial Demand

Silver was traditionally used in the photographic industry. But this use has reduced drastically due to the advent of digital photography.

Nowadays the industrial uses of silver include the manufacture of photovoltaics due to its high light reflection properties, the manufacture of electrical appliances due to its resistivity being the lowest amongst industrial metals, medicinal uses due to its antibacterial properties and RoHS complaint solders.

Some new markets are also opening up for silver in the form of water preservation, RFID tags and food hygiene. This demand is a major influence on the silver market price.

Large Investors

The silver market is smaller than that of gold. At present, the physical demand for silver is estimated around $15.2 billion per year. Given the relative size difference it is possible for a large trader or investor to influence market conditions and with it the market price of silver

For example, the Hunt brothers in 1980 caused an acute rise in silver prices per ounce by cornering the market. They began their activities in 1973 and this resulted in silver prices reaching an unprecedented $ 50.35. However, the Federal Reserve intervened and the NYMEX rules were changed to end this practice. It is speculated that just before the silver price spiked, the Hunt brothers held more than 100 million troy ounces of silver.

Hedging

Governments may use silver as a hedge against adverse financial conditions such as inflation, currency devaluation or deflation. This is because if more money is pumped into a country’s economy, its currency becomes less valuable.

Hence governments resort to holding metals like gold and silver which in turn inflates their values.

FORMS OF SILVER INVESTMENT

Bars

The conventional way in which people invest in silver is the buying of actual silver bullion bars. In some European countries like Switzerland, the banks offer ‘over the counter’ trading of these. The bars are flat and rectangular in shape. They are considered ideal because they can easily stored at home or at a bank in a safe deposit box. These bars come in many different sizes. The most common of are 1000 oz troy bars, I kilogram bars, 10 oz troy bars and 1 oz troy bars.

Coins & Rounds

Silver coins are another form in which silver can be brought. These can either be fine or junk silver. The difference is that junk silver coins are older coins and the percentage of silver is lower. A perfect example of fine is the Canadian Silver Maple Leaf coin which is 99.99 percent pure.

Some people tend to opt for the .999 fine silver rounds for their investment and storage purposes. They usually contain one troy ounce of silver and are shaped in the form of a coin. They are produced by a large number of mints and can be customized as per convenience. The prevailing silver prices per ounce are used to determine prices.

Exchange-Traded Products

In this form of trading, the investor has access to the silver markets without the hassle of owning physical bars. These include ishares Silver Trust, ETFS Physical Silver and Sprott Physical Silver Trust.

Certificates

If investors are not interested in storing the actual bars they can have a Silver certificate of ownership. Using this they can continue to trade in the market without having to transfer actual physical silver. The only government guaranteed program in this respect is the Perth Mint Certificate Program (PMCP). Until 1968 the US Dollar was also issued in lieu of the silver certificate.

Accounts

This is similar to the Silver Certificates other than the fact that in this case the bank provides an account to the investor corresponding to his needs where silver can be traded just like foreign currency.

Derivatives, CFD’s & Spread Betting

Silver futures and other such derivatives can be traded on certain exchanges in the global markets. These contribute in determining silver prices per ounce. Most Silver futures trading in the USA takes place on the Commodity Exchange (COMEX).

Mining Companies

In this form of investment you are not directly dealing in silver. Instead, you are dealing in the shares of Companies that mine silver. As silver is found in conjugation with other metals like tin and lead, these shares are actually a base metal investment. This is another factor influencing the silver per ounce.

Conclusion About Silver Prices Per Ounce

Whilst it may seem that silver prices per ounce are influenced by investors alone there are many other factors that affect the market for silver and spot prices for it. Unlike gold, silver has many different uses which makes it a much more essential commodity. Silver has been required for commercial purposes at all points in time in one form or another.

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