Presentation and history of stock market silver :
First of all, let's take a few moments to recall what stock market silver is and what is its history. It is of course a precious metal that is mainly used in industry, in the jewellery, goldsmith's and electronics sectors. Physical silver often takes the form of bars, coins or ingots and its price is quoted on the spot market, allowing investors to speculate on its price variations. In the financial markets, silver is found under the symbol XAG.
But if silver is a stock market asset in the strict sense of the word, it is also an indicator. Indeed, some economists use real-time graphs of stock market silver to predict global economic health. It is also common to think that silver can be used as a basic indicator to anticipate changes in other assets in different financial markets such as other commodities, stocks or currencies.
The history of this precious metal is very old and goes back thousands of years with the first mining exploitation estimated at 3000 BC. Over time and thanks to the strong popularity gained by this precious metal, silver mines multiplied all over the world and silver began to diversify its uses while increasing in value over the years. Thus, demand was so strong at the end of the 19th century that it was necessary to produce 120 million ounces each year to satisfy it.
However, it was not until the 1970s that silver became a stock market asset and therefore its price was quoted in real time. This precious metal entered the market at a price of $1.80 per ounce. The price of silver quickly increased in value and reached the $36 level in the early 1980s. But it quickly fell back to below $10, a level near which it would remain for almost twenty years. During the economic and financial crisis of 2008, the price of silver will however experience another upward phase with a peak at $20, but here again, the trend will quickly give way to a downward correction. Historically, the highest price of silver has been reached at nearly $50 per ounce following a reversal of the upward trend in 2011.
The fundamental analysis of live silver prices:
Fundamental analysis is, of course, one of the essential methods of analysis for trading in silver on the stock market and you must be able to detect and interpret external indicators that could raise or lower the price of this precious metal. To help you do this, here are a few examples of elements you can follow.
First of all, of course, the supply and demand for silver will be taken into account. To do this, we will monitor the countries that produce this raw material, such as China, Mexico and Peru. Of course, we will also study the importing countries that consume the most silver, such as the United States, the United Kingdom and India. It is the difference between supply and demand for silver that will have the greatest influence on the price of this metal. As far as demand is concerned, we will not forget to take into account the demand from industry, as silver is still often used today for its electrical conductivity and is therefore used in the composition of many products such as sustainable infrastructures, including photovoltaic panels. Similarly, silver is also highly sought after in the medical sector.
Some global economic data will also be closely monitored. During periods of strong economic growth, the price of silver tends to rise positively, thanks to an increase in the consumption of electronic products, jewellery and vehicles. However, silver prices may rise during periods of recession. This is partly due to the fact that, like gold, silver is considered by many investors to be a safe haven.
We can also look at the correlation between gold and silver. Indeed, the gold/silver ratio, which expresses the amount of silver needed to buy an ounce of gold, is also followed by many investors. Last year (2019), the discount between silver and gold was high at 90 ounces of silver for an ounce of gold. In fundamental analysis, a high ratio generally means that silver might be favoured by investors over precious metals because of its price. A low ratio, on the contrary, tends to make gold more attractive to investors.
Finally, the value of the US dollar can also be used in a fundamental analysis of the price of silver. Remember that silver is quoted in this currency. As a result, when the dollar is weak against other currencies, purchases from countries other than the US become more interesting with an advantageous exchange rate, which tends to increase demand. Conversely, a high dollar will slow down these purchases. Moreover, silver is often used as a hedging instrument in times of high inflation and many investors use it to cover their losses in the currency market.