Silver is one of the financial market’s most popular precious and industrial metals. On average, over 662 million ounces of silver are traded every Monday to Friday at the London Metals Exchange (LME).

Globally, the number is substantially higher when you factor in other markets like Shanghai and Singapore. This article will highlight some of the top reasons to trade silver.

Silver as in industrial and precious metal

There are two main types of metals in the financial industry: industrial and precious metals. Industrial metals are then grouped into ferrous and non-ferrous metals. Ferrous metals are those that contain iron and they include steel and cast iron. Non-ferrous include copper, lead, nickel, tin, and zinc. These metals have vast industrial uses.

Precious metals, on the other hand, are rare and have no major industrial usage. Gold is the most popular precious metal. Silver, platinum, and palladium are at the intersection of industrial and precious metals. They are extremely valuable and also have some industrial use. For example, silver is used in the manufacture of semiconductors, solar panels, and mirrors.

Silver has several catalysts

A key reason silver trading is important is that the metal has several catalysts that are useful in fundamental analysis. Like gold, silver is moved by actions of the Federal Reserve. In most cases, silver tends to have an inverse relationship with the US dollar.

As shown below, silver dropped by about 16% between January and September 2022. In the same period, the US dollar index rose by a similar percentage.

There are many economic data to keep an eye on when trading silver including US jobs, inflation figures, retail sales, and US consumer confidence. Significantly high inflation usually signals that the Federal Reserve may continue hiking interest rates, which typically leads to a strong USD and a lower silver price. As such, unlike other metals like zinc and copper, there will always be economic data to watch when trading silver.

Regular macro data in silver trading

Another key reason to follow the news when trading precious metals like silver is that countries regularly publish data that is useful for analysis. China, one of the biggest buyers of silver, publishes its retail sales, and industrial and manufacturing production every month. The same is true with other leading industrialised countries like the United States and those in Europe. Therefore, silver traders have a vast amount of data that they can use in their analysis.

In addition, it is fairly easy to estimate demand and supply dynamics for silver when looking at data and news from its leading producers. Russia, Australia, Chile, Mexico, and Peru are some of the biggest silver producers.

Silver is cheaper than gold

Silver and gold have a close correlation since the same events mostly move them. In most cases, silver tends to rise when gold is rising and vice versa. Therefore, many day traders prefer using silver as a proxy for gold. Historically, silver is significantly cheaper than gold. At the time of writing, the gold-to-silver ratio was 87. This means that an ounce of gold can buy 87 ounces of silver.

Therefore, to a large extent, for many day traders with a limited amount of money, silver can be more profitable than gold. For example, $1,000 can buy 50 ounces of silver without leverage compared to 0.625 ounces of gold.

Multiple options to trade silver

Finally, you can trade silver in multiple ways, including CFDs, ETFs, futures, and options. One of the more popular vehicles due to its simplicity is a contract for difference (CFD). A CFD is a financial derivative that tracks the price of a real asset. This means that buying a CFD allows you to benefit as its price rises, or falls, without owning the real asset.

Summary

Silver is one of the most popular assets in metals trading. It is also well-liked by long-term investors who value its key characteristics like a hedge against inflation and its role as a store of value. In this article, we have looked at its dual role as a precious and industrial metal. We have also assessed some of the top reasons you should trade silver.