Silver Futures & CFD

Silver is an indispensable metal as it is considered both as a precious and an industrial metal. It is an essential component in nearly every industry and it is also considered as secure and affordable investment. Therefore, it is held high in the list of industrial and investor preferences. Silver has been proven as a precious metal and a time-tested commodity. It’s lower per unit cost compared to gold makes the metal an attractive option to small investors with limited finances, thus often referred as gold’s cheaper cousin and dubbed as the “poor man’s gold”. In fact, silver also performed well during periods of “Quantitative Easing” (‘QE’) as investors’ search for real assets to hold during times when investors faith in currencies were at lowest ebb.

Throughout the years, Silver has become an important input material for many industries. Due to its excellent electrical conductivity, silver finds many applications in electronics from printed circuit boards to switches and TV screens, especially in Plasma Display Panels. Moreover, interest from the photovoltaic industry also indicates the potential for upward demand in the coming years. In 2012, industrial applications accounted for around 44% of total silver demand, while silver’s use in jewellery manufacturing, silverware and in the making of coins and medals represented 30.8% of total demand. This shows that silver is more correlated to macro-economic growth. As a matter of fact, an economic slowdown in silver-intensive economies such as China or South Korea will hurt silver price.

Investment demand is also an important factor that has a positive influence on silver prices in recent years. In fact, Silver Exchange Traded Funds have been net buyers, with holdings of all of the silver exchange-traded products around the world rising by 6% so far this year to hit 646 million ounces as of August 28, 2013, the highest on record. This signals strong demand among smaller and retail investors who are among silver’s most ardent enthusiasts.

After touching lows in July 2013, the price of silver is once again on an upward trend if we go by the recent market sentiment. This tradable level of price uncertainty usually increases wider and greater participation from stakeholders (hedgers, speculators and investors) in the derivatives segment - futures, options and OTC markets.