Introduction:
The history of man is packed with coins, jewelry, and artifacts that have spoken to the intrinsic value esteemed in gold and silver due to their rarity, durability, and usefulness. Silver is frequently called the poor man’s gold because of its lower cost when contrasted with gold. Silver’s history is long. The first evidence of silver mining dates back to 3000 B.C., in Turkey and Greece. Throughout history, silver has been synonymous with currency. One of the best reasons for investing in silver is that it might shield during economic crises.
Silver is a gleaming white metal with a few unprecedented attributes. In contrast to gold, the price of silver swings between its apparent role as a store of value and its role as an industrial metal. Hence, price variances in the silver market are more volatile than gold. There are a few advantages of trading Silver that developed in recent years. With consistent headways and progressively widespread use of the internet, trading silver has become more popular.
What factors most affect silver?
Geopolitical issues
Like gold, silver prices frequently rise when geopolitical issues are affecting everything. US President Donald Trump, for example, kept on causing concern, by persistently conflicting with China and the Middle East. As a result, the president secured a trade war with the Asian country, with both the US and China forcing duties on one another.
These geopolitical issues supported the white metal, as it consistently made gains in the third quarter of 2019. Traders will have to monitor trends as other geopolitical issues will more than likely continue to develop.
Supply and Demand
The supply and demand condition for silver is one explanation the metal is so significant: supply is constrained yet the demand is steady. In any case, the basic economic fact of markets is that any anticipated or genuine increment or reduction in supply or demand will move prices, often disproportionate to the change itself. For instance, if a strike obstructs mining at a major producer, silver prices may spike over the short term. Furthermore, the announcement of a new use of silver, such as in solar panels, will create more buying and create upward price pressure.
Global Speculation
We should not overlook that the physical Silver market is a worldwide one. Silver-spot prices don’t rotate exclusively around the oversupply of US currency, establishments who need to take profits or household investors who get the bogus idea that the silver cycle is done. Europe is in a difficult situation, the Middle East is in turmoil as consistently and nations, for example, India and China are storing as a lot of silver as can be found. Silver is an overall business with a huge number of employees.
Gold Prices
There is no hard and fast rule for this but it has been seen that the price of silver tends to mimic the same trends as that of gold. This means that if the prices of gold rise or fall due to factors like demand, change in the cost of importing, rise or fall in the cost of production, etc, silver tends to mimic.
Monetary policy and Economical data:
Silver price is impacted incredibly by the monetary policies of different national banks in significant economies like the US, Europe, Japan, China. So, we can decipher the impact of interest rate on the silver price as an increase in interest rate will reduce the price of silver and vice-versa.
Since the general public has two different ways to set aside their money and the first way is money related instruments (FD, Bonds, and so on) and the other way is to purchase valuable physical commodities essentially gold and silver. Presently if the money related instruments are giving low return given the brought down the interest rate, then the demand for silver will increase and if the interest rate is increased then the demand for silver will get reduced. Economic data which gives insight on the interest rate decisions in the future will also influence the price of silver.
Other factors that affect the price of silver include; inflation, global pandemic, and war, production and recycling of silver, activities of central banks, and so on.
TOP SILVER TRADING STRATEGIES:
There are several silver trading strategies, but Trend Trading and Range Trading tend to be the most popular among traders of all levels.
Trend trading is a trading style that attempts to capture gains through the analysis of an asset’s momentum in a particular direction. Range trading is a strategy whereby a trader identifies overbought and oversold areas (or support and resistance areas) and buys at the oversold area (support) and sells at the overbought area (resistance).
Trend trading is a simple three-step process that consists of, determining the trend, filtering your signals in the direction of the trend, and setting stop-losses and take-profits. There are three steps traders could use to trade a range-bound silver market. The first step is to find the range by establishing support and resistance zones. The second step is to filter your signal. And the third step is to execute the trade and set stop-losses and take-profits.
SILVER TRADING TIPS FOR BEGINNERS AND ADVANCED TRADERS:
- Trade the silver market during main market hours for a lessened cost on the spread.
- Risk management should involve using stop-losses and take-profits. Silver traders should only risk a small amount of capital on each trade.
- Traders should use the gold-silver ratio to gain an edge when trading silver.
- Buy low and sell high.
- Before you decide to follow a given analyst be sure to check how long they have been in the business and if they are known for their good performance.
- Begin your journey with a small investment and build upon it.
Why trade Silver?
There are several major reasons to trade silver however, the most common are the following:
- Safe Haven
Safe-haven assets are where investors and traders put their money to protect against fundamental disruption. Silver has historically retained or increased its value during downturns or generally volatile markets, allowing protection against losses that growth equities may see in such conditions.
- Risk Mitigation.
Probably the best purpose for investing in silver is that it may give security during economic crises. Central banks, for the most part, respond to crises by bringing down interest rates and expanding the money supply. These activities can debilitate currencies and dissolve trust in stock and security markets. In contrast to financial assets, physical assets, such as silver can’t be made on paper. There is a constrained over the ground supply of silver. Hence, it is unquestionably more probable than financial assets to hold its value during periods of turbulence.
- Attractiveness.
Trading of silver is attractive to many different types of investors and business people. Whether you are a daytrader, investor or businessman. As silver prices often move opposite to the U.S. dollar, it is possible to hedge against financial losses by positioning themselves in silver. Buying silver can also be justified as a balance against the effects of inflation and the devaluing of currencies.
Think we missed something? Let us know in the comments section below.
-WINSALA Gbotemi.
- Staff Writer, Eagle Global Markets.
-First published on egmanalytics.com
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