What is the Spot Silver Price?
The spot silver price is the price at which silver can be bought through market exchanges in real-time. An investor pays the spot silver price to buy the silver as a tradable commodity on an exchange, mostly at the Multi Commodity Exchange (MCX). The spot silver price is calculated based on various factors and is quoted at the MCX per 10 grams of 0.999 fine silver.
The spot silver price works similarly to listed stocks on various stock exchanges as it fluctuates in real-time based on market factors and trading volume. The constant fluctuations help investors secure profits when the spot silver price is higher, resulting in quick profits.
Traders and investors mostly use spot silver prices on commodity exchanges to understand how much they will have to pay to trade in silver. It is mostly used for bullion transactions, with the trading activity in silver taking place in various hubs and marketplaces across the world by investors based on the spot silver price.
Spot Silver Trading
Spot silver trading is the process of buying and selling silver based on the spot silver price quoted on an exchange such as MCX. While traditional silver investing includes buying and holding physical silver bars, coins and jewellery, spot silver trading allows investors to invest in silver and make profits from the price fluctuations without physically buying and storing the metal.
Spot silver trading can be executed by investors through the spot or futures markets, apart from other indirect ways such as ETFs. In India, this trading is executed in the spot market in INR, and the spot silver price is quoted for 10 grams of silver with a purity of 99.9%, with higher purity silver also available to trade through the spot silver trading. The trading settlement is usually done the next day for the silver purchased. However, in case the prices go down, the investors can hold the spot silver receipt for the long term to minimise losses.
How are silver rates decided?
With multiple applications, investors have to search silver price today/daily to see how much the silver rate has fluctuated as the rate is decided differently often. In India, the silver price today or any day is decided by deriving its value from the international markets.
Investors and traders look at the Global Chart of Silver to analyse and understand how much they will have to pay to buy silver based on the silver price today's results. As the Global Chart of Silver is denominated in Dollars, investors have to analyse the Dollar Index to analyse how the Dollar is performing against the Indian Rupee and the subsequent silver price.
Furthermore, the silver rates are also decided based on the costs incurred to import the silver, such as duties, charges, taxes etc. These charges, when adjusted, further lead to determining the silver rates in the international and the domestic spot silver marketplace. If the spot silver price is different in India when compared to a foreign nation, the silver Futures price also tends to be different based on the fluctuating spot silver price.
What are the factors that influence the Silver rates?
Numerous factors affect silver rates. Here are the factors that affect the MCX silver price when trading online and domestic silver rates in case of physical buying:
Demand and Supply: If the demand for silver is higher than the overall supply, the silver rate in domestic markets and the silver rate in online trading, such as the MCX silver price will increase. On the other hand, if the demand for silver is lower than the supply, the silver rate will decrease in the global markets.
Economic Conditions: A country's economic condition largely affects the silver rates. Investors prefer to buy silver either physically or through silver trading when the economy is witnessing negative growth or facing inflation. As inflation rises, the currency values go down, and investors tend to invest in commodities such as silver to hedge against their losses in other investments, hence influencing the silver rate.
Currency Markets: The state of the currency market is also a factor in influencing the MCX silver price when silver trading online. As the spot silver price is quoted in INR on Indian spot exchanges, the rates fluctuate based on the INR’s value compared to the US Dollar. Furthermore, as the currency value of the Indian Rupee against the dollar fluctuates regularly, it influences the silver rates.
Benefits of Investing in Silver
Silver is a metal that is constantly in demand, especially in India, considering its various applications. Thus, the benefits of investing in silver include:
Protection against Inflation: At the time of inflation, there is a heavy sell-off in other asset classes, such as equities which can force investors to lose a significant value of their investments. Investing in silver can ensure capital protection as commodities are not affected by the performance of other asset classes.
Lesser Expenses: When you invest in silver, you do not have to incur costs on the making of the bars, jewellery etc., along with expenses incurred on storage and safe-keeping. Silver bought online allows investors to profit from the price difference without having to buy the metal physically, effectively increasing the profit margin.
Liquidity: Whether you buy silver physically or online through silver trading, you can sell the metal immediately without having to wait for sellers. It allows for high liquidity and ensures that you can sell and realise cash whenever you want.
Diversification: Commodities such as silver are known to provide immense diversification to a portfolio as they have an inverse relationship with other asset classes such as equities. In case other assets are going through a bear cycle, silver in your portfolio or physically can ensure you can realise cash and be liquid.
Better Savings: Similar to gold, silver as a commodity has witnessed steady appreciation in its price over time. Whether the silver is bought physically or invested through silver trading, it provides better savings and ensures the capital multiplies over time.
How to Invest in Silver?
If you want to invest in silver, you will have to open either a Demat account or a derivatives account or both, depending on who you plan to invest in silver. Once you have opened these accounts, you can choose from the following options to invest in silver:
Spot Silver Trading:
One of the most cost-effective and simplified ways to invest in silver is by silver trading electronically. This process allows investors to buy and sell gold online instantly through various spot exchanges such as NSEL and NCDEX to realise immense liquidity and quick profits.
Physical Investing:
You can invest in silver by buying it physically for a trader or a jeweller according to the money you want to invest. However, in the case of physically buying silver, you will have to bear the added cost of storage and safe-keeping and can not sell it at the real-time spot price of silver.
Silver ETFs:
Exchange Traded Funds are a basket of securities that invest money across asset classes associated with silver. Silver ETFs are listed on various stock exchanges and can be invested similar to the process of stock trading. A Demat account is needed to invest in silver ETFs.
Silver Futures:
A futures contract is a legal agreement between two parties to sell a predetermined quantity of an asset such as silver at a predetermined time and price in the future. Such silver futures are traded on the MCX and are quoted based on the MCX silver price. You will need a derivative account to invest in silver futures.
