To start with, what is silver trading? Traders have highly valued silver for many years now. The metal has various usages including jewellery or as a form of currency. In fact, it is considered a vital raw material in commerce worldwide but as an individual investment as well. Silver traders are attracted to this precious metal because of its inherent value. These qualities are also what makes it an ideal trading opportunity. To trade silver online, traders either buy the actual physical raw material or simply speculate on its real-time price movements through CFDs.
In other words, traders speculate on whether the price of the asset will rise or fall without actually owning it. CFD trading is the most common way used by the majority of traders nowadays as it allows them to generate revenue when the price of silver either increases or falls.
Read below to find out more details on how to get into silver online trading as well as some of the benefits of trading silver. Learn about the factors affecting the price of silver as well.
Ways to trade silver
As already mentioned, traders can trade physical silver. This includes buying silver, such as jewellery and physically holding it until the trader wants to sell it. There is also the possibility to trade silver futures. This means that if traders believe that the price of silver will rise in the future, they can enter a contract with an agreed present price to buy silver which will be delivered on a predetermined date in the future. The goal, in this case, is to sell the physical silver at a higher price compared to the price you initially paid.
Last but not least, metal traders can trade silver CFDs, as already discussed earlier, meaning that they can trade with leverage as CFDs are leveraged products. Therefore, they get full exposure to the specific trade with a rather small initial deposit in their trading account. However, they need to keep in mind that profits or losses are calculated based on the full size of the position. As a result, both the profit and the loss appear larger.
Why trade silver
In precious metals trading, silver is considered one of the oldest trading commodities. Its price is still rising despite the fact that silver coins are no longer used as currency. This makes silver a popular trading opportunity among traders. In a nutshell, silver tends to preserve its value, it usually resists inflation and its price has the tendency to rise in the long term. Read below for more details on why to trade silver.
- Silver resists inflation. Although keeping money in a bank account seems like a good option for maintaining and potentially increasing one’s capital, in times of inflation, currencies tend to lose their value. However, the opposite usually happens with silver. It gains in value and inflation does not seem to influence it. That’s why trading silver is considered a good choice to hedge against inflation.
- Silver is cheaper than gold. Gold is around 75 times more expensive compared to silver. This makes a rather demanding trading option financially. If traders buy physical gold, they might give around €55,000 for a brick weighing 1000g. However, if they buy a 1000g silver brick it will be almost CZK 750.
- Silver is considered a potential safe haven. In spot metals trading, most traders look for assets that can help them resist the market’s ups and downs. A crisis in the economy or politics may cause such market storms. These assets are considered safe havens because they resist market fluctuations and because their price might even rise. Silver is among these assets.
- Silver price tends to increase. Because of its chemical properties, silver is widely used in various industries and the demand for it is actually high. In fact, the bigger the demand the more its price will rise.
Factors that affect the price of silver
Being familiar with the factors that affect the price of silver is vital. All in all, supply and demand, the price of gold, the USD, economic trends and geopolitical tension are some of these reasons.
- The US dollar. In most cases, when the price of silver falls, the dollar strengthens in value at the same time. This mainly happens because of the metal’s safe haven status, meaning that it is a commodity in which money flows during times when the US dollar is failing. In the opposite scenario, that is, when the US dollar is doing ok, traders turn towards other assets which results in lowering the price of silver.
- Gold & Silver. Almost always, gold and silver are correlated. This means that when gold’s price falls, the price of silver does too and vice versa. However, remember that silver is more volatile, meaning that there are more daily market fluctuations.
- Price of oil. Current geopolitical developments and the overall uncertainty in the markets usually determine the level of oil price. In times of crisis, the price of oil tends to increase. The price of oil is usually related to the price of silver as well.
Online silver trading
Nowadays, it is extremely common for traders to trade silver online. First of all, it is more convenient, as every trader with a computer or smart devise and internet connection can trade. Online trading is also cost-efficient because traders get to start trading silver with a small initial deposit. It is also more flexible as traders can always speculate on a possible decrease in silver prices.