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Silver Trading on Forex

While a second-fiddle to gold, silver is actually a precious metal held desirable by a lot of market participants. Silver’s correlation to both gold and the U.S. Dollar makes this so.

Highly-volatile, global markets keep tabs on the prices of silver. Such diligence stems from investors’ inclination to seek safe assets in their efforts to keep their head above water, as the political and economic landscape of the global market prove to be unpredictable.

What keeps investors on the prowl for profit is consistency with the current price despite changes in spot price. The abbreviation, XAGUSD means that the spot price for silver is quoted in USD.


The Basis of Trading Silver on Forex

While more volatile than gold, silver is still seen as a safety net in times of financial turmoil. As such, many trade and sell silver because:

  1. It can be used to hedge inflation
  2. When placed in an equity-only portfolio will help decrease volatility. This is so as there is no correlation between it and other assets.
  3. The demand the precious metal is high in the industrial sector. It covers 50% of the precious metals in the market. Even if it falters as an investment, its industrial still makes it purposeful.
  4. It is a safe haven commodity and will therefore withstand periods of economic uncertainty.
  5. Trading with silver CFDs allows an investor to profit from silver price fluctuations no matter how rapidly-changing.

Historical Graph and Prices in Silver Trading

The past fifty years saw fluctuations in the price of Silver. Worthy of note is its peak at the end of 1979 which was logically called, the Silver Peak. This resulted from the attempt of the Hunt brothers’ efforts to corner the market.

Save the government’s hold on part of the precious metal, analysts concur that the hunts were holding 1/3 of the entire supply of Silver. The peak saw the price of silver jump from below $1.5 per ounce to almost $32 per ounce. However, come the end of the year 1980, the price took a dive.

silver blocks

The Correlation Between Silver and Gold, Silver and the U.S. Dollar

It is already apparent that silver’s fundamentals are wholly different from Gold. However, the two metals still hold a strong correlation with their price as these are traded by the same investors.

The year 2008 was crucial to both Gold and Silver. Came to be known as the Crisis of 2008, the year saw the superiority of the former over the latter. Silver prices climbed exponentially with volatility.

A good way to illustrate the relationship among Gold, Silver, and USD is to take a look at the Technical Analysis of your chart. If it says that there is a high probability for the price of silver to fall and say you sell 1 lot (5,000 oz) of XAG/USD at $17.38, the position size will be equivalent to $50 profit or loss. This would be for every 1 cent movement in Silver’s price.

All in all, if you are a trader looking into expanding your portfolio, it would do you well to try your hands on Silver and see your opportunities for profit expand.