Page 64 - MEX-Yearbook-2017
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Commodity Insights
Silver
Introduction Currently, the main business market for silver is the industrial sector, where
Silver has had a rich history as one of the world’s most important metals for it is employed in batteries, TVs, and other electrical equipment such as
monetary exchange and for ornamentation purposes. Although no country microcircuits. Silver is also favored for use in color paper for printers and
today uses silver in a precious metal backed currency, demand for the this helps to offset the reduced use of silver in photograph development
product has picked up thanks to declining confidence in fiat currencies and as digital photography rises to prominence. The jewelry market is another
the metal’s relatively cheap price when compared to others in the precious major contributor to the silver trade, as is the silverware market.
metal group. Furthermore, unlike gold, silver has a variety of industrial Silver has additional qualities that make it attractive to commodity brokers
uses that ensures that demand for the product will remain high should and other traders of commodities. Its relationship to gold is one of the most
currencies like the dollar remain stable. salient qualities. Gold and silver generally trade within a range of 20-70
Silver has many special features as a commodity. Firstly, it has a huge array ounces of silver to the price of gold. This ratio fluctuates constantly, and
of industrial uses. It can be used as electrical components in computers allows those involved in silver trading who are monitoring the market to sell
and household appliances such as washing machines. It also has less their silver and buy gold or vice versa as the prices dictate. Silver can also
conventional uses, such as in photograph development and in odor control possibly act as a substitute for gold and hence act an alternative currency,
in shoes and clothes. It is also more commonly being used in trace amounts as although both metals possess similar qualities silver is markedly cheaper
in bandages and is still used in X-rays. Silver also currently enjoys a on the market.
relatively low cost when compared to other commodities such as oil and
gold. This is in stark contrast to the beliefs espoused by many industry Fundamental Facts
experts: silver is one of the best investments a speculator on the commodity • Factors that influence the silver spot price and price of silver futures
market can make.
Silver has appeal as an investable asset for several reasons. First, if include increased demand for industrial applications and the hardship
investors continue to lose faith in the fiat currencies and the U.S. dollar in in founding new silver mines, both of which will raise the price of
particular, demand for silver could rise. This is especially true in emerging silver options.
markets where other precious metals remain out of reach but silver is still • Silver prices can also be affected by companies stockpiling silver,
a relatively inexpensive option on a per ounce price basis. Silver is also which they are known to do when prices begin to rise as it is a crucial
seen as a potential hedge against inflation allowing investors to protect component of many electronic devices. This will drive demand up and
at least part of their portfolio from this phenomenon. Lastly, since silver increase the spot price also.
has a number of industrial uses, investors can consider silver a play on • The rising and falling of the value of the dollar can also interfere with
increased manufacturing or industrial activity as the product is needed in daily silver prices and silver futures prices in America, as most silver
a number of applications ranging from batteries and electronics to medical is imported from outside of the United States. Mexico is the largest
and photographic materials. producers of the silver, followed by Peru and China.
63 | MEX NEPAL YEAR BOOK 2017
