Silver Extends Year-To-Date Slide as Spot Price Declines

Key Moments

Spot Silver Moves Lower

Silver prices (XAG/USD) fell on Friday, according to FXStreet data. The metal was quoted at $65.06 per troy ounce, a decrease of 0.99% compared with the $65.71 level recorded on Thursday.

From the start of the year, silver prices have now dropped by 8.47%, extending their year-to-date decline.

Current Silver Price Levels

The latest price snapshot for silver in U.S. dollars is as follows:

Gold/Silver Ratio Holds Steady

The Gold/Silver ratio – which reflects how many ounces of silver are required to match the value of one ounce of gold – stood at 64.01 on Friday, broadly unchanged from 64.06 on Thursday.

Why Investors Look at Silver

Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.

Main Drivers of Silver Prices

Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold’s. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.

Role of Industrial Demand

Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.

Interaction Between Silver and Gold Prices

Silver prices tend to follow Gold’s moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.