Silver is available as a commodity in a number of grades. In India, for example, silver trading involves 6 grades of silver commodity, depending on whether or not it contains any impurities, and these grades are named for their degree of fineness (9999, 9995, 9990 etc). However, in order to be eligible for commodity trading on the Commodities Exchange (COMEX) the quality of the silver commodities cannot drop below .999 fineness.
Silver has many special features as a commodity. Firstly, it has a huge array of industrial uses. It can be used as electrical components in computers and household appliances such as washing machines. It also has less conventional uses, such as in photograph development and in odour control in shoes and clothes. It is also more commonly being used in trace amounts in bandages and is still used in X-rays. Silver also currently enjoys a relatively low cost when compared to other commodities such as oil and gold. This is in stark contrast to the beliefs espoused by many industry experts: silver is one of the best investments a speculator on the commodity market can make.
Silver futures are traded on several commodities exchanges, with India’s Multi Commodity Exchange being the largest. The Commodities Exchange (COMEX) and the National Commodity and Derivatives Exchange (NCDEX) – the latter also based in India – are also major centres for silver trading. The commodity ticker code for silver when is SILVER when traded on MCX, SLVPURAHM when traded on NCDEX, and SI when it is traded on COMEX.
Currently, the main business market for silver is the industrial sector, where it is employed in batteries, TVs, and other electrical equipment such as microcircuits. Silver is also favoured for use in colour paper for printers and this helps to offset the reduced use of silver in photograph development as digital photography rises to prominence. The jewellery market is another major contributor to the silver trade, as is the silverware market.
Silver has additional qualities that make it attractive to commodity brokers and other traders of commodities. Its relationship to gold is one of the most salient qualities. Gold and silver generally trade within a range of 20-70 ounces of silver to the price of gold. This ratio fluctuates constantly, and allows those involved in silver trading who are monitoring the market to sell their silver and buy gold or vice versa as the prices dictate. Silver can also possibly act as a substitute for gold and hence act an alternative currency, as although both metals possess similar qualities silver is markedly cheaper on the market.
Mexico is currently the main silver producer in the silver market, producing around 15% of the global supply. Peru, Australia and China are also prolific silver producers. It must be noted however that only around 25% of silver produced comes from silver mines, the rest is made from scrap recycling or the refining of other metals.
Factors that influence the silver spot price and price of silver futures include increased demand for industrial applications and the hardship in founding new silver mines, both of which will raise the price of silver options. Silver spot prices can also be affected by companies stockpiling silver, which they are known to do when prices begin to rise as it is a crucial component of many electronic devices. This will drive demand up and increase the spot price also. The rising and falling of the value of the dollar can also interfere with daily silver prices and silver futures prices in America, as most silver is imported from outside of the United States.