A precious metal, silver has several physical properties that lend it to being widely used as an industrial commodity.
Silver is found in pure form as well as alloyed with other metals like gold and chlorargyrite.
A large amount of silver is produced as a by-product when copper, lead, zinc and gold are refined.
Close to 95 percent of the demand for silver comes from industrial uses, jewellery and silverware, and photography.
The use of silver in industrial uses has been growing steadily since 2001. China, India and the United States accounted for 70 percent of the growth seen in the last decade.
Trends in the silver jewellery sector have been mixed. India and China posted increases in jewellery demand in recent years.
The supply of silver includes “new” silver that is mined and supply from above-ground stocks.
Above-ground stocks or secondary sources of silver include coin melt, scrap recovery, and dishoarding from countries where export is restricted. The supply of silver from these secondary sources is price sensitive.
Silver can be mined from primary mines and as a by-product of gold mining.
Silver is predominantly traded on the London Bullion Market Association (LBMA) and COMEX in New York.
LBMA, as the global hub of over-the-counter (OTC) trading in silver, is its main physical market. Comex is a futures and options exchange, where most fund activity is focused.
Silver is invariably quoted in the US dollars per troy ounce.
Factors Influencing the Market
Economic events such as national industrial growth, global financial crisis, recession, and inflation affect metal prices.
Commodity-specific events such as the construction of new production facilities or processes, unexpected mine or plant closures, or industry restructuring, all affect metal prices.
Governments set trade policy (implementation or suspension of taxes, penalties, and quotas) that affect supply by regulating (restricting or encouraging) material flow.
Geopolitical events involving governments or economic paradigms and armed conflict can cause major changes.
A faster growth in demand against supply often leads to a drop in stocks with the government and investors.
Silver demand is underpinned by the demand from jewellery and silverware, industrial applications, and overall industrial growth.
In India, the real industrial demand occupies a small share in the total industrial demand of silver. This is in sharp contrast to most developed economies.
In India, silver demand is also determined to a large extent by its price level and volatility.
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