Factors Affecting the Price of Silver

How much is an ounce of silver worth? There are all sorts of elements that come into play in impacting the price of silver. 

Why is this important? The silver market is a commodities market and it therefore depends heavily on a number of factors, which can in turn impact the cost of getting silver from a mine into the hands of a consumer in the form of an artinisal piece. 

Silver Price

Live Silver Price by Goldbroker.com

This displays the value of pure silver per ounce.

We are a silver jewelry supplier and will spend the next few words discussing some of the interesting factors that go into pricing silver. These include important insights into logistics, trading and even into calculating the value of your own silver pieces. 

Planning for Silver Costs

We focus on ways of minimizing cost by planning ahead, not always through simple means. If you’re familiar with the ‘options’ market, this can give you a leg up. Options in this context are simply a financial tool that allow buyers to purchase or short-sell commodities at predicted future prices. Rather than waiting for silver prices to get out of hand, some suppliers and large scale retail organizations would rather agree to pay a nominal price ahead of time just to ‘lock-in’ future silver prices, particularly when there are signs of an adverse catalyst ahead. Anything that could impact the supply chain, like riots in the streets for instance, could certainly be considered a relevant factor.  

Of course, while supply chains are impacted, in this case, another key factor is that the economic issues as well as the quarantine have caused demand to go dramatically down. If we were having supply chain issues, while maintaining the rates of demand, prices would be going up. However, the reduction in demand, especially in the brick and mortar context as related to COVID-19 means that prices more or less stay the same, even though production and shipping are even harder to maintain safely.

Any other significant impacts on the supply and demand would also change the value of silver. Sometimes geopolitical and environmental factors play a significant role as well.

Orders versus storage: a Logistical Question

Another question that arises a lot regards the balance between having plenty of silver on-demand, stored somewhere in a warehouse and of rather ordering what we need when we need it, at later notice. Luckily, the Taxco silver market has readily available supplies, allowing us basically the best of both worlds. Having an agile logistical organization allows us to adapt to meet demand quickly. This is further important as ‘storage’ is essentially seated or de-activated capital. It’s important that we don’t have too much tied up in storage. For this reason, we chose a lean model that allows us to buy and produce our Mexican silver jewelry quickly. 

Silver Market Sellers and Corners 

So, we’ve covered supply and demand, which is one of the most obvious factors that manifests in price fluctuations. Another element mentioned briefly above is the challenge of obtaining and producing quickly based on sometimes shorter demand cycles. 

This can affect the price of logistical operations, but still the price of silver remains another element, unless in considering logistics one brings into account economies of scale. As an agile logistical company, we are more concerned with eliminating excessive storage than with creating economies of scale, at least until considerably increased demand warrants it. 

However, the price of silver in some cases also depends on the variety of sellers available. For instance, if there are three major suppliers in a city and two become pre-occupied, the third may have an effective, temporary monopoly. This doesn’t happen as much in global markets, but it can effect local artisans and suppliers slightly more, because they could have difficulty replacing their silver supply at short notice. It’s important to note that this is not an issue we’ve had in our business dealings in Taxco de Alarcon or elsewhere, but it is nonetheless a factor that affects silver wholesalers elsewhere. 

International versus National 

To add a few notes to the former section, local conditions can certainly affect local supply in ways that sidestep internationally low prices or ‘ease of access.’ This is particularly true in Taxco, where the volume of silver being used to produce pieces is quite high every day. If there were, for instance, a hitch in the mining of silver in the Taxco mines, this delay logistically would certainly be felt throughout much of the industry. 

Additionally, if there were a considerable spike in prices, it would be likely that some artisans or shops would be temporarily ‘priced out.’ Jewelers who work at a medium to low price point have a more difficult time breaking even and hitting acceptable margins when commodity prices are high. They would rather just wait till prices come down again, or maybe in some cases they may have a bit of silver and gold stocked up in case this happens. This would be sort of like the oldschool version of options trading. Simply stock up on the material physically when prices are in the lower bands. 

Preparation, in a cases like this, can be the key to keeping operations together. However, the silver supply in Taxco remains a fairly smooth ship. We have not yet experienced nor do we expect to experience any significant setbacks. 

The Value of Silver and the Value of a Dollar

Commodities are known to fluctuate based on the value of cash. Silver, in this case, is no different. A standard economic understanding dictates that as inflation rises and the value of cash decreases, commodity values increase across the board, unless a particular commodity somewhere has an elsewise reason. To some degree, this takes place simply because as the value of the dollar decreases, naturally, most everything else will increase in value in comparison to it. This inverse correlation in the marketplace is also closely related to the ephemerality of ‘money’ versus the hard, underlying value of commodities. It is well understood that the value of the dollar was originally supposed to be pegged to gold, and that the US among other countries has strayed from this. When the dollar loses value, we are reminded even further that money is essentially a piece of paper or even worse, a number in your account, and that in contrast, hard commodities have had inherent value all throughout history. 

However, this move in prices is often exaggerated by trading activity that attempts to predict fluctuation in commodities prices based on certain catalysts. For instance, any time there is a large scale ‘printing’ of money, commodities values rise. Silver and gold both present opportunities for people to not only invest in commodities with ‘hard value,’ but to also do so in a way that they get something that is beautiful, stylish and which they enjoy. 

The question of trading silver is a different one altogether that we may go into detail about further on this blog at another time. It certainly is interesting to try to understand trading intricacies, particularly when the market seems so hectic. 

Is it time to Buy Silver? 

In 2011, silver topped out at around 1,500 USD per kg, and since then has not come anywhere near that figure. As we continue on this topic, please note that nothing in this article is intended as investment advice. We simply intend to take a look at the charts and have a slightly better understanding of price action. Since late 2015, silver has been sort of trading in a range, where it fluctuates between 450 USD and 580 USD, roughly speaking.

This kind of pattern usually indicates a sound bottom, although do keep in mind that this is still far from zero. We could definitely see silver rise in value considerably again, but this appears to only be quite a rare occurrence, given that the last price highs were back in 2011. 

How Much is your Silver Worth?

This is a great question to ask for many reasons. Some individuals may want to have an item appraised that is an antique, something that has been in the family, just to gauge its value and to keep it safe. Others may have accumulated a significant amount of silver jewelry over the years and are finding that they’d rather have the money to spend than the silver, especially at this time when so many people are having difficulty finding work and are burning through their savings. 

If you need to sell your silver, first make sure you don’t go to a pawnshop that’s going to offer you 10 cents on the dollar of what it’s worth. Especially, if you’re dealing with any piece that has significance to yourself or to the family. 

That said, value can be a difficult thing to discern, because aside from the value of the silver that is inherently inside the piece, you also need to have some less tangible way of measuring the value of the artisanry and craftsmanship. If you know what percentage of silver is in your pieces, all you need to do to get this starting figure is to weight the pieces and then multiply the resulting number by the percentage of silver in the piece. For instance, .925 is a commonly used figure to constitute sterling silver, as silver is a soft metal, so it is often mixed with another, more sturdy ore to help a piece maintain itself over the years. So, with a 925 piece, you would multiply the overall weight by .925, as the silver would be 92.5%. 

The next step may be in gauging the artisanry of the piece. Clearly, this could end up constituting quite a wide gap in value, even given the exact same percentage of silver. It will add value to your sale if you also consider who is the type of audience that will like one or another of your silver pieces in particular. By ‘marketing’ to the wrong audience, you significantly lower your product’s value, so keep that in mind! Otherwise, auctions are also great ways to exposure your jewelry to a wide audience. The more eyes you get on them, the more likely it is that someone out there will appreciate what you’re bringing to the table and will therefore also be willing to give you a fair price for it. 

Moving Forward

We hope this article was helpful. Check out our wholesale Mexican silver selection, and be sure to reach out if you have any questions or want to inquire about an ongoing order!