In times of good economy, people spend a lot of money on jewelry and items containing precious metals, such as silver. Similarly, if revenues stagnate or decline, those purchases are usually the first to be deferred. The level of economic growth and health in emerging markets is considered an important indicator of this segment of demand. The consumer price index reading has registered an average annual increase of almost 7%, but the price of silver has fallen by 25%.
Some investors choose silver to cover their other shares, while others see it as a store of value that helps in times of uncertainty. Since investments in silver are not made for a current return, some investors will choose to pay interest rather than the long-term appreciation of silver holds. In fact, silver is only an effective hedge against inflation over extremely long periods of time, measured in decades or centuries. Silver market participants have seen a history of strength in the dollar that has put pressure on the price of silver.
Consumer Price Inflation (CPI) figures for the U.S. The U.S. recently stood at 7.7%, compared to the widely expected 8%. Due to their long history of use as a medium of exchange, silver markets continue to be influenced by government actions and policies.
Jeffrey Christian, managing partner of the CPM Group, believes that while the prices of gold and silver may be suffering a short-term hit, investors with a longer-term market view may view this fall in prices as an opportunity. Understanding silver price trends requires a careful study of several different factors. In the long term, greater investment in silver exploration and development will be needed to maintain mining production. Since China is a major manufacturer of both electric vehicles and solar panels, which use silver extensively, this could mean good news for silver and raise prices a bit in the coming months.
According to a report by the London Bullion Market Association (LBMA), the supply of silver has recovered at a much faster rate than demand, and the biggest increase in supply is coming from Latin America. While analysts tend to be cautious about issuing long-term forecasts for commodities, algorithm-based forecasting services regularly provide price perspectives for longer periods of time. When those economic concerns turn into total crises, there is usually significant upward pressure on the prices of silver and other precious metals.