Silver is second only to gold in terms of investment volumes. As with any other commodity, its value depends on supply and demand. Silver is a highly volatile precious metal: its price can change by 1-2% intraday. On top of that, long-term trends (daily and weekly) are common to this precious metal, which makes silver an excellent instrument for long-term investments.

Get in-depth information on silver futures and forecast the price of the precious metal using the online chart and analytics from InstaForex.

Benefits of investing in silver:

high volatility
affordable price in comparison with gold and platinum
inflation hedge
wide industrial use and high demand
receding quantity (unlike gold, silver cannot be reused, and therefore its amount is constantly depleting)
silver is unresponsive to crises and financial bubbles

Indeed, investments in silver cannot guarantee you substantial profits. There are always risks of losses. In addition, investing in silver has its disadvantages. Its main drawback is price stagnation. The price of silver can be flat or fluctuate slightly, but this will not be enough to produce high yield.

What drives silver prices

There are several factors that determine the value of silver:

Availability of the precious metal in the market, that is, the global silver production statistics.
Inflation or any significant financial crisis. To retain their value, funds are invested in precious metals such as gold and silver.
Gold prices: there is a special relationship between the price of gold and that of silver. Thus, if gold moves up or down, silver will follow suit.
Industrial demand. Silver is widely used in various industries: electronics, medicine, chemical, automotive, solar panels production, etc.

Factors that influence silver prices negatively

The decline in the value of silver is influenced by several economic and production factors. Firstly, it is the discovery of new silver deposits. Millions of tons of ore can significantly reduce the overall value of this precious metal in the market. Secondly, it is a slump in industrial production that drives the prices down. Someday, demand for household appliances, computers, and mobile devices may fall, and then the value of industrial silver may depreciate.

Ways to trade silver

The first and the most common way is to buy silver. The precious metal is usually purchased in bullions. Ideally, silver bullions should be bought in large and well-known banks that have a license to trade precious metals. The second way is to purchase investment coins. A successfully purchased coin can increase its price several times.

Lastly, the trader can invest in silver. In this case, there are three online trading options:

contracts for difference (CFD)
silver futures
investing in stocks of gold mining companies, exchange traded funds (ETFs), or silver mining firms

Summing up, stability, lack of inflation, and high demand are the main reasons that urge investors to buy silver. There certainly is no point in spending all your money on silver, but investing part of your capital in it is a wise decision.