XAG/USD is a precious metal that has been used for thousands of years as money and jewelry items, among others. It is likely you have been hearing people talk about the spot price of silver time and again, but the problem is that you do not have a clear idea of what it is all about and the opportunity attached. Well, if that is the case, this article is an attempt to shed light on what you need to know about spot price of silver.
What is the Spot Price of Silver?
This could be described as the amount indicated on silver commodities for carrying out buying and selling transactions. The spot price of silver is the rate at which this precious metal is traded at a point in time. This price is not constant; it fluctuates on a daily basis and has the tendency to be highly volatile. A variety of factors, mostly economic, can have influence on how safe silver is perceived as a store of value. The prevailing situation in the market at any time also has effect on the spot price of silver.
It has to be noted that expectations on the part of traders play a significant role in the determination of the spot price of silver. For example, when traders expect the price of the precious metal to rise in the future, they might start making moves to buy more of it now. This could lead to a rise in demand and, of course, the present spot price. It then means that when there is a hike in price, it necessarily does not mean there has been a fall in supply of silver.
Silver Spot Price and the Futures Market
Arguably, a great opportunity for money making exist in the light of the relationship between spot price of silver and expectations nurtured by traders. This relationship is played out in the futures market, which is one in which commodity contracts are bought and sold. A silver commodity contract represents an agreement between buyers and sellers to complete the delivery of a specified amount of silver on a particular future date. The price that is agreed under such contract remains unchanged no matter what happens to the future spot price. This sort of arrangement could actually turn out to be a win-win outcome for both the buyer and seller involved in such a transaction.
The seller of silver in a commodity contract benefits due to the fact that he is guaranteed earning a specific spot price of silver at a future date when delivery is made. So, it does not matter much to a seller what happens to the price in that he is, to a certain degree, insured against unfavorable fluctuations.
On the other hand, the buyer in a silver future contract can also reap some rewards should things go as expected. For example, if a buyer expects future prices to rise and moved promptly to enter into a futures contract, he will make significant gains in the event of actual future price rising way beyond what was agreed in the contract. However, some buyers often prefer to sell commodity contracts to a third party before it expires.
About the author: Kim is a part time writer for ForexTeemo.com - a profitable Forex signals service with verified results since 2012.