Eric Sepanek
SBC Founder
Eric Sepanek is the founder of Scottsdale Bullion & Coin, established in 2011. With extensive experience in the precious metals industry, he is dedicated to educating Americans on the wealth preservation power of gold and silver.
With talk about investing in precious metals, it can be very confusing about what the terms mean. Let’s answer some questions about the spot price of silver.
If you’ve been exploring the options available for you in precious metals investment, it’s easy to get confused about all the different terms that are thrown around. One of the least understood terms is spot price, typically used with regards to a precious metal’s performance on the market. Here are some answers to help you get a better understanding of what spot price is and how it impacts the price you can expect to pay for silver investments.
What Is the Spot Price of Silver?
When people sell silver, there are a number of different options available. Spot price is the term used for a commodity if you were to purchase it physically right now. An easy way to remember this term is that it is the price for silver on the spot.
In essence, the silver spot price is based on how much immediately delivered silver would be worth in a specified currency at any given moment. But because there is no single specific physical marketplace where people can bring their silver, the silver price is derived from the futures market using a formula that takes into account current interest and dividend rates and how many days until the futures contract is mature.
Here are some frequently asked questions, and their answers, about silver investing and the spot price of silver.
1. What’s the difference between London Bullion Market Association (LBMA), North American market pricing and pricing in other places in the world?
LBMA and North American markets historically have been the largest, but other world markets can also set different prices. Most prices are based off the LBMA prices for physical bullion, because in 1933 when gold was confiscated in the U.S., London became the next largest physical bullion exchange and took over the market share the U.S. had previously enjoyed.
2. What are the long-term trends for and range of silver?
Precious metals such as silver are often a wise investment, because they will always hold value. That being said, silver is currently enjoying a low investment cost, and is expected to rise again in the future, making it a great time to invest in this precious metal. With the end of the LBMA Silver Fixing after a century of pricing support, silver’s price is very low and is expected to rise again.
3. What factors influence the price of silver?
As with all commodities, supply and demand play a strong influence in the price of silver, but beyond that, economic crises, inflation, the perceived value of other currencies, low interest rates and similar issues can also affect the price of precious metals, including silver.
4. What are different ways to buy silver and why is silver a good investment?
You can buy physical silver from a silver dealer like Scottsdale Bullion & Coin. You have the option of purchasing silver contracts, but keep in mind that physical silver is always a safer investment than investing in paper contracts, which may not end up being worth the paper they’re printed on.
5. Is silver priced the same way or differently than gold?
Both precious metals are priced based on market demand and a variety of other factors, but for the most part, they’re priced similarly, even in terms of the ratio you can expect between gold and silver.
6. What’s the relationship between silver and gold?
Silver and gold are both precious metals with a long history of value in the world, whether in adornment or financial wealth.
7. Why is gold above a thousand dollars and silver significantly lower?
One way of telling whether one metal is being grossly over- or under-valued is the ratio between the two metals. Gold typically sells for around 65 times the going price for silver, so when the ratio is higher than that, say for example 85 times silver’s going price, the market ends up correcting as people purchase inexpensive silver until the ratio is back to normal. When gold is significantly lower than the ratio, it will be purchased to take advantage of market conditions until the ratio has, once again, been corrected.
8. What kinds of people are investing in silver and what are the benefits when you buy gold and silver?
There are many different reasons people invest in precious metals. People who have lost money in the stock market or other financial investments often turn to silver because, though the prices vary, the metal itself has value.
Though this is a good start for investing in precious metals by first understanding the silver spot price, there are plenty more questions to be asked. For more information about silver investing, contact the friendly and informative consultants at Scottsdale Bullion & Coin.