Financial analysts will always remember 2020 as a highly volatile year for most assets. The COVID-19 pandemic has taken financial markets on a wild ride that has largely benefited precious metals such as gold and silver. These commodities are known as “flight to safety” assets that tend to attract investors in times of financial uncertainty, which explains why silver jumped from a low of $12.27 in mid-March to more than $28 on August 5th. Trading sentiment is just one factor that drives the price of silver in a variety of forms, including silver bars. San Diego silver investors should keep the factors below in mind when taking market positions.

Bullish Gold Runs

Expanding on the aforementioned “flight to safety” factor, silver traders keep an eye on gold prices to follow the herd instinct. When Wall Street underperforms, investors flock to the perceived safety of precious metals, and they usually start with gold before setting their sights on silver. When gold prices rise steadily for an extended period, silver values often follow suit.

Economic Supply & Demand

This is supposed to be the most important factor because it’s rooted in economic principles, but the commodities market has been ruled by speculation for more than a century. The supply of silver is limited by virtue of being a natural resource. Demand for this commodity is constant because of its utility. Supply and demand are part of fundamental analysis, and they’re closely watched by active traders. Whenever there’s a spike in demand, an uptick in prices is bound to occur.

Microeconomic Trends

This factor is sometimes difficult to interpret because it doesn’t always make sense, at least not on the surface. When global economic leaders are going through good times, it’s only reasonable to expect greater demand for jewelry and high-end electronics, thus driving up silver prices. However, this trend may develop even when times are hard because wealthier individuals and speculators may rush to take advantage of lower prices, at least in the beginning of an economic cycle, thus creating a temporary uptick in prices.

Inflation & the U.S. Dollar

There’s a general agreement among investment analysts about the deleterious effects of inflation on asset portfolios. Too much inflation can interfere with the valuation of the American dollar, thus making silver an attractive investment. The problem with this factor is that the greenback isn’t only resilient but also difficult to predict because of its status as the leading international currency. You can only have a depressed U.S. dollar for so long. At some point, the euro or the British pound sterling may take a dive, thus pushing the greenback up and driving silver prices down. 

Whether they’re looking for expert advice on silver prices or they want to buy gold, San Diego collectors should work with trustworthy precious metal dealers who offer high-quality service and have years of experience. Call on the industry-leading professionals at First National Bullion when you’re ready to invest in precious metals, including gold, silver, platinum, and palladium. Give us a call today at 858-666-6570.

The statements made in this blog are opinions, and past performance is not indicative of future returns. Precious metals, like all investments, carry risk. Precious metals and coins may appreciate, depreciate, or stay the same in cash value depending on a variety of factors. First National Bullion does not guarantee, and its website and employees make no representation, that any metals for sale will appreciate sufficiently to earn the customers a profit. The decision to buy, sell, or borrow precious metals and which precious metals to purchase, borrow, or sell are made at the customer’s sole discretion.