Silver is traded worldwide 24 hours a day in Chicago, Hong Kong, Zurich, New York and London. The London Metal Exchange (LME) is considered to be the heart of the silver trade. Silver is traded on a spot basis and in the form of silver futures on the LME, which offers traders a "fixâ€ - the opportunity to buy and sell at a set silver price.
Because silver is both an industrial material as well as a precious metal suitable for value retention in times of economic uncertainty, the silver price often fluctuates between these two market valuations. Its dual nature, together with a small market, ensures that silver's price is more volatile than the gold price.
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What has been the annual return on silver in Euros and US dollars? What was the annual change since 2001?
Source: London Bullion Market Association (LBMA)
Note: calculation based on end of year silver prices
The COMEX division of the New York Mercantile Exchange is the heart of trading in silver contracts. Millions of ounces in silver futures and options per day are traded here. It is therefore also at COMEX that the current silver price - the "spot price" - is determined, which is used worldwide.
A number of major players have been accused of manipulating the price of silver via the futures market. One of the ways how the market may be influenced is through "naked short sellingâ€ . This practice entails artificially decreasing the silver price by suddenly creating a large quantity of silver stocks - although this is not backed by any actual physical silver. Short selling has disrupted the silver market to such a degree that the futures market has become decisive to the silver price and not the underlying value of the physical silver itself. This phenomenon partly explains the high volatility of the silver price.
The gold to silver ratio is the relationship between the gold and silver prices. Based on this ratio you can calculate how many troy ounces of silver can be bought with one troy ounce of gold. In the last period this ratio hovered around 1:45, depending on market activity. This means that you can buy 45 troy ounces of silver with one troy ounce of gold.
The historical monetary relationship between the gold and silver price is 1:16. This relationship can be explained, among other things, by looking at the ratio of mineable gold and silver. The Earth contains about 17.5 times more silver than gold (0.07 parts per million compared to 0.004 ppm according to the U.S. Geological Survey). This ratio has been maintained by various civilizations during the evolution of various monetary systems.
In 1792, the newly formed U.S. Congress adopted the First Coinage Act, which officially established the dollar as currency, whereby the dollar was set at 371.35 grains (64.79891 milligrams) of pure silver. The Quarter Eagle ($2.50) was set at 61.875 grains of gold. This law also legally fixed the gold/silver ratio at 15.
The value attributed by investors to this historical relationship of the silver price compared to gold differs per investor. The current ratio arround 1:45 could suggest that despite the strong rise of the silver price in recent years, the silver price could increase even more in order to return to the historical ratio of 1:16.
GoldRepublic bases its silver prices on the spot silver price. The buy and sell prices listed on GoldRepublic's website are comprized of the spot silver price, multiplied by a dealer spread for which GoldRepublic can buy the silver. When you buy silver at GoldRepublic orders are always calculated on the real-time spot price.
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