Silver prices continue to face the same pressures that global commodities are facing in the markets as a result of weakness in China, a sliding US dollar, emerging market currency slack and the actions of speculators. This has been especially notable in futures trading where the price of silver retreated sharply on international bourses. December futures contracts of silver declined by 0.75% in New Delhi by Rs.278 to close at Rs.36,703 per kilogram on the MCX futures exchange. The prospects for silver are less bullish when it comes to March 2016 futures -silver is down Rs.260 and is trading at Rs.37,453 per kilogram as at 14th of October 2015. In Singapore, silver is trading at $15.71 per ounce – for a decline of 0.7%. It is clear that silver futures are bearish in binary trading markets, with multiple put options to boot. This is being perpetuated by bearish trends in precious metals around the world. Silver futures are particularly vulnerable. However, is this the case with the spot price of silver on a day-to-day basis? Over the past month alone, we have seen the price of silver moving from $14.43 per ounce on 15 September to its current market price of $16.07 per ounce on 15 October. Clearly, the bulls are charging in silver and traders are starting to take notice.
What Determines the Price of Silver?
At any given time, silver traders are highly active on the global markets. These markets include Hong Kong, Chicago, Zürich, New York and London. The latter is considered the central marketplace for global silver trading. There is another market that sees huge volumes of silver being traded on a daily basis known as COMEX division the New York Mercantile Exchange (NYMEX). The difference between the London market and the NYMEX is that London is the centre of physical silver trading while New York is the centre of paper contracts trading for silver. The spot price of silver is determined on the COMEX. Since silver is a rare precious metal, its supply is limited. Therefore, demand/supply considerations determine the price of this metal. Fundamentally, the underlying value of silver continues to increase and it is well regarded around the world as a store of value. Various other factors can impact upon the silver price such as cross currency exchange rates, interest rates, trade deficits, inflationary factors and so forth.
Widespread Practical Applications Boost Demand for Silver
The current price of silver can be obtained at any one of several major markets, including Toronto, Zürich, Singapore and London. Online binary trading markets feature silver as one of the most heavily traded commodities, where novice traders and experts can place call and put options on this precious metal. Besides for trading purposes, and a store of value, silver has many practical applications in the world today. It is used in silver jewellery, the car industry, decor, tableware, silver coins, photography, reduction, insulation and energy uses, fine photography and so forth. Silver also has practical applications in medicine, sustainable technology and nanotechnology. In terms of industrial applications, silver is used as a catalyst, in electronics, in batteries, in bearings and in soldering among others.
Are Economic Conditions Paving the Way for a Silver Rally?
On the face of it, the global economy is precariously balanced. We have seen a deluge of negative economic data emanating from China, Japan, emerging market economies and more recently the US. While the world’s number one economy is still performing well, the actual figures are falling below forecasts time and again. The latest retail sales figures for September are a case in point, and this is helping to drive negative economic sentiment vis-a-vis the US economy and the global economy. The fact that the Fed decided against hiking interest rates in September is an important signal to the US and the world. The US economy does not feel sufficiently strong to withstand the global pressures being applied to it as a result of China weakness. Should the US decide to hike interest rates above the 0% – 0.25% range, this will have an immediate impact on the demand for and price of dollar-denominated commodities. A stronger dollar translates into weaker demand for EM currencies and other majors.
Precious metals are now gaining momentum, as is evident from the increasing demand for gold in recent days. Silver has been trending lower in recent years. In fact, the silver price has agonised through 3 years of successive declines. 2015 may well have been another such year for the precious metal, but it looks like things may be turning the corner in the long run. At the beginning of the year, silver was trading at $15.73 per share, and by the beginning of October the price had dropped as low as $14.50 per ounce – a decline of 8.5 percentage points. Today, the price of silver is $16.06 per ounce. This remarkable turnaround is even more impressive given what has been happening in global markets. The price of silver has been declining consistently since 16 May 2015 when it was trading at $17.70 per ounce. From there, binary option traders were able to place put options on this precious metal and enjoy profits all the way through to silver’s nadir for the year on 24 August when it was trading at $14.15 per ounce.
But then silver rebounded. The price of silver has gained approximately $2 in under two months. The reversal is the antithesis of what has been happening on global stock markets after the China currency devaluation and the equities rout that has erased trillions of dollars from global bourses. Online binary trading sites have reported huge volumes of call options on silver since the Shanghai Composite index and the Shenzhen Index soured. In much the same fashion as traders seek a safe haven with gold, silver also shines when equities markets lose their direction.