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Silver, like other precious metals, may be used as an investment. For more than four thousand years, silver has been regarded as a form of money and store of value. However, since the end of the silver standard, silver has lost its role as legal tender in the United States. more...

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(It continued to be used in coinage until 1964, when the intrinsic value of the silver overtook the coins' face values.)

Silver price

The price of silver has been notoriously volatile as it can fluctuate between industrial and store of value demands. At times this can cause wide ranging valuations in the market, creating volatility.

Silver often tracks the gold price due to store of value demands, although the ratio can vary. The gold/silver ratio is often analyzed by traders and investors and buyers. Over most of the 19th century, the gold/silver ratio was fixed by law in Europe and the United States at 1:15.5, which meant that one troy ounce of gold would buy 15.5 ounces of silver . The average gold/silver ratio during the 20th century, however, was 1:47.0 .

From September 2005 onwards, the price of silver has risen fairly steeply, being initially around $7 per troy ounce but reaching $14 per oz. for the first time by late April 2006. The monthly average price of silver was $12.61 per ounce during April 2006, and the spot price was around $15.78 per ounce on November 6, 2007. As of March 2008, it hovered around $20 per troy ounce. . However, the price of silver plummeted 58% in October 2008, along with other metals and commodities, due to the effects of the credit crunch.

Factors influencing the silver price

Private and institutional investors

From 1973 the Hunt brothers began cornering the market in silver, helping to cause a spike in 1980 of $49.45 per ounce and a reduction of the gold/silver ratio down to 1:17.0 (gold also peaked in 1980, at $850 per ounce) . However, a combination of changed trading rules on the New York Mercantile Exchange (NYMEX) and the intervention of the Federal Reserve put an end to the game.; In 1997, Warren Buffett purchased 130 million ounces (4,000 metric tons) of silver at $4.41 per ounce (total value $572 million). Similar to gold, the silver price has more than doubled in value against the United States dollar since December 2001 . On May 6, 2006, Buffett announced to shareholders that his company no longer held any silver. In April 2006 iShares launched a silver exchange-traded fund, called the iShares Silver Trust (NYSE: SLV), which as of April 2008 held 180 million ounces of silver as reserves.;

The large concentrated short position

The CFTC publishes a weekly Commitment of Traders Report which shows that the four or fewer largest traders are holding 90% of all short silver contracts. Furthermore, these four or fewer traders are short a total of 245 million ounces (as of April 2007), which is equivalent to 140 days of production.

On 2008-09-25 The CFTC finally relents and probes the Silver Market after persistent complaints of foul play draw the still-skeptical Agency to investigate

Industrial demand

The use of silver in items such as electrical appliances and medical products has increased since 2001. New applications for silver are being explored in batteries, superconductors and microcircuits, which may further increase non-investment demand. The expansion of the middle classes in emerging economies aspiring to Western lifestyles and products may also contribute to a long-term rise in industrial usage. Even so, due to the advent of digital cameras the enormous reduction in the use of silver halide-based photographic film has tended to offset this.

Read more at Wikipedia.org