In a free economy, the price of each asset is the result of the supply and demand of that asset. For this reason, to study and analyze the Silver market, we must pay attention to the factors affecting its supply and demand in the world. Despite a long history of silver mining, its production and reserves are relatively limited.
According to some estimates, the total amount of silver mined throughout history is 1.5 million tons and the world's silver reserves are 29,665 tons. In general, the annual supply of silver depends on the amount of mining and production. Factors such as the invention of new mining methods, the closure of mines due to workers' strikes, and و affect the annual production of silver.
Any factor that reduces the production and supply of silver, causes the price of silver to rise, and vice versa. The largest silver producers in the world are Mexico, Peru, and China. As a result of monitoring and monitoring the amount of extraction and the situation of mines in these countries, it is recommended to check the amount of supply.
Factors affecting the demand for silver should be examined from four perspectives:
- Silver as a safe investment commodity
- Silver as Jewelry and decorative utensils
- Silver as a consumer good in the industry
- Silver as a safe investment commodity
Since silver is a safe commodity like gold, the factors that affect the price of Gold also affect the price of silver, and it is necessary to consider these factors in analyzing the silver market. The important factors affecting the world gold price are as follows:
Monetary Policy Adopted by the Federal Reserve:
If the Federal Reserve decides to raise interest rates, the price of gold and consequently the price of silver will fall. Also, if the interest rate is reduced by the Federal Reserve, the price of gold (silver) will rise. Because by lowering interest rates, the interest on bank deposits decreases and causes losses to investors. As a result, people prefer to withdraw their capital from the bank and enter a safe market such as gold and silver.
Economic information and data:
Unemployment rate, wages, production rate, GDP growth statistics, as economic data indicate the economic situation. If the figures related to these parameters indicate an improvement in the economic situation, it will lead to a decrease in the price of gold (silver) and vice versa.
For example, a decrease in the unemployment rate, an increase in production, and a growth in GDP (improvement of the economic situation) will lead to a fall in the price of gold.
The higher the inflation rate, the more investors will be willing to buy gold (silver) to maintain the value of their assets. This increase in demand causes the price of gold (silver) to rising and vice versa.
Dollar price fluctuations: The dollar is inversely related to gold (silver). If the US dollar index strengthens following the improvement of the economic situation, the price of gold (silver) will decrease and vice versa.
Economic instability: The greater the economic instability and uncertainty, the greater the willingness to invest in safe goods. As a result, as the political and economic uncertainty increases, the price of gold (silver) increases. For example, rising tensions between the United States and North Korea are undermining economic stability and increasing the price of gold.
Silver as jewelry and decorative utensils
Silver jewelry and tableware account for approximately 25% of the annual demand for silver. Like any other commodity, as the demand for silver jewelry increases, so does its price. The use of silver as jewelry and decorative items is very common in India. As the demand for this type of jewelry (wedding or celebration season) increases, so does the price of silver, and this should be taken into account in the analysis of the silver market.
Silver as a commodity in the industry.
Approximately 50% of the annual supply of silver is used in industrial applications such as electronics, solar energy and pharmaceuticals, and medical equipment. The higher the economic growth of countries, the higher the demand for silver industrial consumption. There is a direct relationship between the economic growth of developed countries and the price of silver.