How Is The Live Spot Price Calculated?

Spot Silver Sterling Price Per Ounce

Spot Silver Sterling Price Per Kilo

Silver isn't just nice and shiny, It's also a particularly interesting trading vehicle. That's because it behaves as both a commodity, with its value being driven by the interplay between supply and the industrial demand for the metal, and also as a store of wealth, with its price being driven by major economic factors.

While silver trades around the clock on various exchanges, its value is determined by the COMEX in New York. This term refers to the theoretical price of the actual commodity, if one wished to acquire it immediately, as opposed to the implied price embedded in the various futures contracts that trade on the COMEX exchange.

Futures prices are driven by multiple factors, including carrying cost, insurance and other economic variables.

The COMEX

While silver trades in any number of markets around the globe, the COMEX in New York is the place where silver as a financial asset is most active. This distinguishes it, for example, from the London exchange which remains the most active market for physical bullion.

The COMEX exchange sees the greatest number of paper contracts, including futures contracts, trade on any given day. This is the principle market for both industrial producers and consumers. Producers, including both miners and refiners, hedge their exposure to price collapses, while consumers that use silver for industrial purposes hedge against significant price increases.

The Live Price in London, UK

Within the realm of COMEX silver prices, there can be a great number of values that are implied by various futures contracts. Each of these contracts will vary by expiration month and implied volatility. The spot is referred to with any commodity on which futures contracts are traded. It is used to reference the price for trade of the physical commodity in the instant market. For example, one might say the value of March corn climbed by eight cents driven by a move in the spot price of corn of six cents. The additional two cents represents the carrying cost of corn fluctuating.

The price of silver fluctuates each day and is driven by various factors. At the most basic level, the push and pull between supply and demand is a driving force. When demand rises, the spot rises until there is an equilibrium between the price buyers are willing to pay and at which sellers are willing to sell.

Likewise, when the supply increases, sellers are willing to sell at a lower value because there is more product. The price falls until a new equilibrium is reached where the sellers are no longer willing to drop the price and buyers are still willing to buy. The phenomenon happens in the silver market as well, and is the primary driver of the spot price.

The factors that influence supply and demand then, are the true drivers of value. Supply factors are easy to understand as miners can only find and extract a certain amount from the ground. The finite nature of this supply is a big reason that silver remains valuable. On the demand side, however, the factors are more complex.

Argentum is one of the most useful industrial metals because it is an excellent conductor of electricity. As manufacturers find alternatives, demand is affected, just as fluctuating consumer desire for electronic products similarly affects the demand.

I hope I haven't been too verbose in this article!

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- Branding Bullion With Hallmarks

By purchasesilver.co.uk

Friday, January 06, 2012