The price of silver has increased sharply in recent weeks, leaving many economic experts to explain why. While silver prices have traditionally been used as a hedge against inflation by many investors who want some diversity in their portfolio, several different events in recent weeks have made this investment more popular among investors.
Historically, silver prices have increased as world currencies have become less stable. While the price of this commodity rarely goes higher than gold, it is still viewed as a good hedge against instability and inflation. Of course, silver also has a number of industrial uses that gold does not, which contributes to its greater price volatility. Because of this, it generally makes sense to look at long term trends in silver rather than short term price changes.
Typically, silver experiences a small drop in the late summer months as factory orders undergo a slight decrease. This year, however, silver actually increased in value during this time frame. Many experts believe that this is because of increasing instability throughout the world. The European debt crisis has caused many people to pull money out of their bond investments in Europe and look for another place to put their money. Rising instability throughout the Middle East has caused many commodity investors to take their money out of high risk investments such as oil and put it into something with a little more stability.
Although silver prices have more volatility than gold, many investors still view silver as one of the more stable commodities. Since it cannot go bad and will always have industrial applications, many experienced investors use silver as a place to keep their money in the short term while waiting out a political or currency crisis. The metal can offer a good rate of return to investors who are willing to stomach a high amount of risk.
Finally, many new investors have become interested in solver due to increased media coverage and its comparisons to gold. Many new investors view the metal as a good way to get started in the commodities market.