by Martin on March 6th, 2017

Is the value of silver aiming for last year’s high?

2016 was great for silver as it recovered from 2015’s downturn. Global economic slowdowns in 2015 caused the demand of silver to decrease, and it lost value. In 2016, though, the value of silver rose once again due to increased demand as more and more companies became active enough to require silver as a production material. This year, the same seems to be possible, and silver CFDs are already headed toward the previous 2016 uptrend.

Factors propelling silver’s rise

Compared to other assets like gold, silver is on a higher projected growth rate, and there are various reasons for this:

Multiple uses

For speculators, silver is only a precious metal, just like gold, with intrinsic value. They, therefore, use this intrinsic value of silver to make money from changes in price without having to deliver or purchase physical silver. For industries, silver is a major component used in the manufacture of various products. When industries are buzzing, silver becomes in high demand, and this causes its value to rise.

You can see how silver prices dropped during the 2008 global recession and its rise in value following the QE measures governments put in place to boost industrial performance.

silver past performance


Now, President Trump is expected to boost US industries so that he can deliver the jobs he promised. A boost to these industries will also increase the demand for silver and this is what’s causing its value to rise.

Supply of silver may be waning

If you look at the books by mining companies, they will show a gradual decrease in the volume of copper. Less and less silver is being delivered from the current silver mines, and companies are reluctant to explore new mines because of its value. Silver, while considered a precious metal, is relatively cheap, which makes it uneconomical for companies to invest in.

This is the kind of thing that happened to oil when OPEC oversupplied crude oil. If mining companies are not worried about exploring new potential minefields, its supply goes down and its price higher. Silver is now in relative scarcity, with more to come, so demand is really rising, causing its price to rise too.

silver recent performance

Cheaper alternative

Gold is obviously expensive, with an ounce going for above $1,200 while silver is trading at around $18 and its highest peak was at $40. As you can see, gold takes the crown for these precious metals, but not for a savvy investor. With a low price, silver is, first of all, more affordable for any trader.

Then there’s also the advantage of small numbers, which makes small changes in price have a bigger return. Take, for example, if both gold and silver rose just one point, the trader with a contract on silver will enjoy a 1.25% rise while the one on gold gets a 0.08% return. Looking at it this way, you can see how the value of silver is so lucrative.

By Martin

Martin is a professional trader with 3 years of working experience in a Cyprus-based brokerage. After the experience, he moved to the UK where he became a financial news reporter at a local news outlet. His years of trading experience help him deliver the most quality news, while also analyzing its impacts on various markets.

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