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The Spot Price of Silver

The spot price of silver is the amount that a pure ounce is worth at any specific time. The number that runs across the ticker along with stock quotes is the spot price. This price is roughly what you should expect to both pay and sell your silver for, with some mark ups and mark offs that will come into play based on a variety of factors. The spot price of silver is always changing, by the day, hour, and even the minute. Though the majority of the movements in pricing occur during normal US trading hours, overseas activity and after hours trading will also play a role.

The spot price that is quoted and referenced by everyone around the world is a product of ETFs that are traded on silver. A silver ETF is, for all intents and purposes, a stock of silver. ETF stands for electronically traded fund and can be purchased in much the same way as you would with other commodities or even stocks. The premise behind an ETF is that you own a share that is not physically in your hand. In other words, you do actually own the silver itself, just not in a physical sense.

Factors in Play

There are many, many different elements that play into how the spot price is determined and set. Of course, overall supply and demand will be the single most important dynamic in the pricing of any commodity. This is oversimplifying, though, and most people are more curious about the underlying causes of silver going up or down.

If you consider why you or anyone else ever buys silver, you will have the answers as to what sets the ebb and flow of the spot price. The average buyer of silver is getting involved for investment purposes. This makes up a good percentage of the silver-owning population. With that said, however, they are hardly the ones who create the spot price itself.

Silver is a sound investment because it has a number of inherent properties that make it valuable. For example, it has a lot of industry uses, meaning that it is a necessity for silver to be used in the production of a lot of different items. These include, but are not limited to different types of electrical products, vehicles, and so on and so forth.

When the producers of these items need a lot of silver, they will naturally be fighting among one another for ownership. The point at which there demand starts to surpass the investment demand and the amount of silver being readily mined is the mark at which the price will go up. This again reverts back to simple supply and demand, with the caveat being that the demand is for actual usage vs. generic investment.

Aside from an increase in real industrial usage, another common reason that the spot price of silver shifts is due to economic stability, or lack thereof, around the world. It is important to note that it is not so much the state of an economy that is vital, but instead that its monetary policy is safe and sound. The more variance that a countries dollar undergoes, especially downwards, the higher that silver will be driven. This is because many people buy silver as a hedge against normal paper money, otherwise known as fiat currency.

Chart courtesy of Kitco.com

Chart courtesy of Kitco.com

When paper money currencies are trading at normal levels, silver will react accordingly without many swings. If a country starts to experience inflation, hyper inflation, or runs into huge amounts of debt, that paper money will start to lose its value. As a currency becomes devalued, particularly a major currency like the USD or Euro, silver spot price will increase. This is the reason why silver is a prime hedge against any paper money. If you own silver and actual currency is holding firm, you will simply be diversified. If your paper money starts to lose a lot of its value, the losses will be compensated for by your physical silver.

These are just a few of the different factors that come into play with silver spot price. If you are new to investing or buying silver, consider where its real demand comes from. Actual companies need it to produce and sell their items, governments and countries want silver in their reserves, and any wise investor wants tangible assets vs. simple paper money that can be devalued. Next time you see major economic news, be it good or bad, be sure to look at the silver spot price and you will almost certainly see a direct correlation.

Buy at Spot Price

Buying silver at spot price is not at all easy to do. Most every form of silver will have a premium attached to it. With coins, this is due to their increased rarity and collectibility. In regards to bullion, the price over spot will be the profit margin for the dealer or seller of the metal. For most generic bullion items, silver can be found for just a couple of dollars over spot price per ounce, with cheaper rates for bulk orders. Coins will be closer to $5-$10 over spot per ounce.

If you wanted to actually order silver for under spot, your only real option would be junk silver. If you don’t mind owning tons and tons of rounds and coins that are only made up of a percentage of real silver per piece, then you will indeed be able to find prices that even out to under actual spot in the form of junk silver. Of course, the drawback here is that you will get a lower return should you decide to sell. In the end, most anything is going to cost a bit more than spot price itself, so your ultimate goal should be to find the best deal possible.