What is the silver spot price – and why is it important?

Silver markets

Silver has two uses. The first is as an industrial metal – because of its conductivity and malleability, silver is a major component of many electronic products, mirrors, solar panels, circuit boards, semiconductors – way too many applications to list here. The second is as an investment – a store of value and precious metal which is both affordable and has the potential to make a profit.

Putting a value on silver is something of a mystery.

In theory, a metal with all the properties that silver has should command thousands of dollars because of its utility and its stability. Unfortunately, silver is not highly regarded in the investment world as its “Big Brother,” gold, tends to hog the limelight because of its relative scarcity and much higher value – and there’s just something about that yellow color isn’t there?

We can see an example of this in the actual production of silver. Unlike gold, silver is very rarely mined for itself. It is normally a byproduct of mining for copper or zinc. This means the price per tonne for processing the ore is reduced because it is spread between the products being refined.

Weight training for silver addicts …

Silver is smelted into bullion – ingots – or blocks of the metal which are normally in 1000 ounce silver bars. This is slightly misleading as silver bars weigh between 930 ounces and 1018 ounces – this equates to around 70 pounds. It is in this form that silver is usually bought as an investment vehicle.

In a 1 kg bar of silver, there are 32.15 ounces of .999 fine silver (the measure is known in the precious metal business as “troy ounces”) This is a handy converter for working out weights of imperial to per kilo silver in order to work out the price silver may fetch per gram, or per ounce.

Silver prices can be found on the Internet at the click of a mouse. The live silver price is the value of silver at that moment. Traders, dealers, and investment houses then add their premium – or commission – to the price.

There are usually two prices quoted when looking up live silver prices – one is for buying the metal (the “ask” price), and one is for selling the metal (the “bid” price). The spot prices are useful in being able to work out the premium being charged over and above the quoted prices silver is fetching.

The bid price is the maximum offer available for silver at the present time. The ask price is the minimum asking price available for silver at the present time. If you want to buy, you will pay the ask price. If you want to sell, you will receive the bid price. The gold price – indeed any commodity – works in the same way.

The difference between the two prices is referred to as the “bid-ask spread”, (Sometimes referred to as the “bid-offer spread”) and is often a reliable indicator of an investment’s liquidity. The smaller the bid-ask spread, the more “liquid” (exchangeable) a commodity – and less “transaction fees” apply to an investor when getting in and out of investment positions.

Trading places

Because silver trades almost 24-hours a day throughout the world The price is constantly fluctuating between Hong Kong, Chicago, London, Zürich, and New York – which are the main exchanges. The exchange which determines the spot price is COMEX or Chicago Mercantile Exchange (COMEX is part of the CME Group).

The silver spot price is quoted in US dollars – to find the local spot price this dollar rate is simply converted into the local currency – whatever prices silver price is quoted in, it is always for one troy ounce of .999 fine silver. The price for the quantity of silver that you have is then simply multiplied by how many troy ounces you have.

It is not possible to buy silver at the spot price. This is just a guide for the market. As we mentioned above, a dealer will add their costs and some profit to the spot price – either buying or selling – and this represents their profit on any deal that they make.

Numismatic silver coins work in a slightly different way. They have a value based on their rarity and condition – and to an extent – the silver content of such coins is almost irrelevant in terms of their worth. For example, In January 2013, a 1794, “Flowing hair” Silver dollar fetched $10,016,875 at auction. The fact that the silver in it was worth around $16 at today’s spot prices Is almost irrelevant.

As you can see from this list – the value is in other factors – not the metals the coins are made of.

Silver bullion coins at today’s metals prices are a great way to start collecting silver coins. The US Mint strikes a wide range of coins with different topics and different values at various times throughout the year. The full range can be found here – and all are available through the Historic Silver Coins site here.