How Overall Economic Climate Affects Silver

The economic performance of the overall world market has a considerable impact on precious metals, especially gold and silver. Often, silver takes cues from base metals like zinc and copper. However, during any major political instability, it often follows gold.

Silver is increasingly used in the manufacturing of solar panels, and the increased demand for solar-based products has led to a rise in silver in the past year. The prices have remained higher in the wake of waning supply and increased industrial demand. In the current year, so far, silver has outperformed not only gold but also crude oil and platinum.

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The above chart shows the comparative price performance of silver (SIVR) (SLV) along with the overall market depicted here by the SPDR S&P Index (SPY) (SPXX). As the S&P Index has been more volatile than silver, it’s hard to see any direct relationship between the two.

However, one important link between the SPDR S&P Index and silver is industrial demand. Higher industrial demand can buoy both silver as well as the S&P Index. Investors can keep looking for clues from the indicators that come out of large economies like the US for insight as to whether demand is increasing or shrinking.

The fluctuations in silver and other precious metals also have an impact on mining stocks like Kinross Gold (KGC), IAMGOLD (IAG), Goldcorp (GG), and Newmont Mining (NEM).