The Price of Silver

March 30, 2012 | By admin More

The price of silver doesn’t receive as much press as the price of gold, but it, too, has been dramatically impacted by the uncertain economy in recent years. Throughout the past few decades, silver prices have seen both slumps and astounding peaks.

The price of silver rose throughout the 1970s, due to a high demand. It saw a huge spike late in the decade, rising to over $50 per ounce. Two brothers, Nelson and William Hunt, played a major role in this. Born into one of the wealthiest families in the country, they bought huge amounts of this precious metal, cornering the market. However, that price wouldn’t last long: within two months it had fallen back to $11 per ounce.

Several world political events, such as the Soviet invasion of Afghanistan and the U.S. hostage crisis in Iran, kept the price of silver fairly high through 1980, however it dropped throughout the decade to follow.

Like the price of gold, the price of silver is affected by several factors. When demand is high the price climbs and, conversely, when the demand is low the price drops. For example, in the 1990s the price of silver followed an upward trend as demand increased by a much higher percentage than supply.

Inflation is also a major factor in the price of silver for two reasons. First, when the value of a dollar decreases, prices of everything from postage stamps to groceries to precious metals adjust to the dollar’s new value. Second, when a dollar doesn’t go as far, many consumers lose faith in stocks and tend to invest more heavily in precious metals instead. Thus, when the economy is hurting, the price of silver often rises.

This principle has been seen clearly in the first decade of the new millennium. Since 2001, the price of silver has been rising, from under $5 an ounce at the beginning of that year to over $30 per ounce by the end of 2010—at the time, the highest it had ever been apart from its spike in the late 1970s.

Between the beginning of 2009 and the end of 2011, silver actually performed better than gold, increasing its value at nearly twice the rate as gold. While the price of gold rose about 78 percent, the price of silver jumped a whopping 142 percent. As of March 2012, the price of silver remains above $30 an ounce, leaving many to speculate just how high it will go.