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Economic fears, supply shortages and even retail investors on Reddit have had a massive effect on the silver price. The precious metal has been trending high lately, and those who “bought the dip” below $13 in March 2020 received great returns for the rest of the year and into 2021.
For those who are on the fence about investing in silver, though, it all comes down to price. While it’s far more affordable than its golden precious metal counterpart, the underlying goal is to buy silver and then watch its value rise. Unfortunately, predicting this can prove difficult for most people.
Of course, difficult doesn’t mean impossible. There are a variety of economic and financial charts you can follow that provide an idea of where the silver price is heading. This guide will help you get a solid understanding of what each of these charts means.
1. Industrial Production and Silver Prices
When people think of silver, they often envision beautiful jewelry, stacks of bullion bars, shiny coins and even expensive figurines. They rarely realize how much silver goes into everyday electronic devices. A single iPhone, for instance, contains about 0.34g of the precious metal.
It turns out that most silver mined goes directly into electronics and industrial uses. This makes charts that track industrial production — especially those linked to computer and electronic products — a beautiful source of information on the potential price of silver.
Federal Reserve Economic Data (FRED) keeps up-to-date charts that track this form of industrial production. When electronics production increases, the demand for silver goes up. When demand is high, you can typically expect value to increase. It’s as simple as that.
2. Inflation and Silver Price
Many people refer to gold as the best hedge against inflation. When you consider the fact that silver performs well in economic upswings, this makes complete sense. If people have the money to buy more electronics, it only makes sense that the economy must be on the upswing.
Of course, this basic rule won’t always hold true. While silver may historically perform better in great economies, we’ve seen instances where very high inflation can cause increased demand for silver. This is why you should closely follow inflation charts when investing.
We saw this play out during the 1970s. High unemployment, an energy crisis, international tensions, recessions and high inflation created the perfect storm for lower silver prices. But since people needed an affordable hedge, the precious metal’s demand and price skyrocketed. Many investors consider silver just as great of a hedge against inflation and economic downturns than gold, which is why they often hold a mix of the two metals in their portfolios.
3. Silver Mine Production
If you’re looking for charts with long-term implications for the price of silver, find those related to silver mine production. While production has been on the rise for many years now, this won’t always be the case. Several issues could come into play.
An important consideration would be a sudden drop in production. This could happen if key mines shut down or labor strikes occur. This would create at least a temporary shortage in supply, and this could cause an increase in the silver price. Of course, some implications are more long term.
For instance, researchers expect silver mine production to peak within a few years. Every year after that will have a smaller amount of silver coming out of mines. Experts expect them to be nearly empty by 2240. When you see downward trends on production charts in the coming years, you’ll know why.
4. The Effect of Government Inventories on Silver Price
Unfortunately, it’s more difficult to come by a live chart of government inventories of silver. This is because investors have no real reason to track this information. So, why is it important in predicting the price of silver? Because of what it might mean in the future.
Government silver inventory charts show that countries around the world now hold less than 50 million ounces of the precious metal in reserve. By contrast, federal banks hold about 1.09 billion ounces in gold reserves. While these statistics don’t affect the silver price now, they could one day.
Imagine a situation where the global supply chain of silver suddenly face interruption, or what if industrial needs grow at a rate higher than anyone expects? If this were to occur, governments would suddenly need massive supplies of silver — massive supplies that they simply didn’t have.
If the reserve levels stay low and the sudden need arises, there’s a good chance the silver price will jump through the roof as the government goes on a buying frenzy.
5. Strength of the Dollar
The strength of the American dollar has a direct relationship with the price of silver. Many other complex issues affect this relationship — including the Fed and interest rates — but you can keep things easy by simply following the U.S. Dollar Index (DXY) chart.
While people from all countries can purchase silver and gold, the benchmark currency for precious metals is the American dollar. This means when the currency weakens, it’s suddenly easier to purchase silver. That creates a situation where both demand and spot price increase.
When the U.S. dollar suddenly strengthens comparative to other currencies, it becomes more expensive to purchase precious metals. This inverse relationship means what’s good for the silver price isn’t good for the dollar. This showcases another example of how silver can act as a hedge.
6. Investor Demand in Silver ETFs
There are many disadvantages to investing in silver exchange traded funds (ETFs) instead of buying silver bullion bars. This doesn’t mean, however, that ETFs can’t be useful to you. Charts tracking their positions in silver can prove invaluable.
These charts may be more difficult to find since every fund is different, but they’re worth the effort. It’s a fact that institutions and hedge funds are far more experienced than most retail investors. If everyone interested in investing in silver had an expert investor whispering in their ear, they’d likely make better decisions.
With silver ETF charts, they basically do. Review the positions and other actions of these silver ETFs for insight on what the “big dogs” are thinking:
- iShares Silver Trust
- ProShares Ultra Silver
- Invesco DB Silver Fund
- Aberdeen Standard Physical Silver Shares
- Global X Silver Miners
- ETFMG Prime Junior Silver Miners
While each of these funds takes a unique approach, each of their actions regarding silver means something. If they’re increasing their position in the physical precious metal, it’s because they expect the silver price to go up.
While we have seen institutional investors make wrong guesses, their experience gives them an advantage over regular folks. Exposing yourself to outside market conditions by investing in silver ETFs isn’t advisable, but following charts that track their silver positions is genius.
7. Bitcoin and Silver Prices
Bitcoin had a meteoric rise over the years. Its extreme volatility should scare off most investors, but it has managed to remain an immensely popular cryptocurrency.
Fortunately, people are finally opening their eyes to the dangers of crypto. When Elon Musk tanked Bitcoin’s value with a single tweet, institutional investors started flocking back to precious metals. Still, the inverse relationship of silver and Bitcoin means the latter’s price charts are valuable.
If you’re in crypto and ready to switch it up, you can easily sell some of your crypto and buy silver & gold with Bitcoin from Silver Gold Bull.
When Is the Silver Price Right? Always!
There are a variety of considerations involved when choosing to invest in silver. While these seven charts will give you an improved idea of what to account for, they’ll never be able to predict any precious metal’s performance perfectly. Fortunately, it’s never a bad time to invest in silver.
At the time of this writing, silver certainly isn’t at its highest point. While the $43 per ounce range in 2011 was impressive, the $49.45 point reached in 1980 shows what the silver price can really do. And with all indications pointing toward a coming shortage, the precious metal could even hit new heights.
If you’re ready to invest in silver, check out everything we offer at Silver Gold Bull today. From solid bullion bars to movie memorabilia immortalized in silver, you’ll find something to meet all your investment needs.