Imagine that you are in a shop to purchase a chocolate bar. Price tag reads $1.50. The price is usually the same throughout the day and possibly even for an entire month. You already know how much cash you will need.
What if prices changed each and every minute? If the price of candy at 10 AM was $1.50 but increased to $1.55 by 10:30 AM, what would happen?
Silver is purchased by this moving price. This changing number is known as a “spot price” in the precious metals world. You may be asking What does the spot price of Silver mean.
This post will examine this unique price tag. This post will explain how the special price tag works. We’ll also learn who sets it and why.
The Moving Price Tag
What does mean by spot price for silver?
This is what the “spot” price would be if you wanted to buy silver and take it home immediately. The “spot price” is what you would pay if wanted to purchase silver and bring it home right away.
Imagine it as a scoreboard that changes in real time during a basketball match. Every time one of the teams makes a basket, the scoreboard changes. Silver spot prices are like this scoreboard. The spot price of silver fluctuates all day while the markets around the globe are open.
Silver is not the same as the silver rings or coins you can buy in gift shops. The price is the raw metal of silver before it’s turned into electronics or jewelry.
Why is it Called “Spot” Price?
Spot is derived from “doing business on the spot.”
You can trade on the spot. The item is yours as soon as you pay. The item is delivered immediately. You do not have to wait until next week, or even next month. Spot price means “right now”.
Who decides the price?
It might seem that there’s a silver boss who decides on the morning price from an office. It doesn’t work that way.
The price of silver is determined by the buying and selling activity in every country. This works like a huge auction.
Imagine an area where children are exchanging trading cards.
- Everyone wants the same dragon card. Kids who already have this card may ask to exchange it for additional snacks or toys. The price goes up.
- When no one wants to trade the Dragon card, Kids who already have it must ask less for someone to exchange. The price goes down.
The same is true for silver. Silver prices rise when many people buy it. Silver prices go down when many people sell their silver.
The Big Markets
But silver isn’t just traded in playgrounds. Silver is traded at large financial centres in major cities such as:
- New York
- London
- Hong Kong
There is always some market somewhere because these cities have different time zones. The spot price is constantly changing throughout the entire week.
Why does the price change?
People buying and selling is what moves the market price. Why do people decide to sell or buy? Why do they change their mind?
There are 3 main reasons for the change in “What does Spot Price of Silver Mean”.
1.How Much Silver We Have (Supply)
Miners dig it up. It is dug up by miners. There is enough silver to go around if miners are able to find it easily. It is called a “high supply.” It is usually cheaper when there are a large number of items.
Sometimes, silver is difficult to locate. Maybe a mine will have to shut down temporarily. Silver becomes rarer if there’s less of it available. Rare things usually cost more.
2. How Much We Need It (Demand)
It’s not just about shiny necklaces and coins. Many everyday items are made of silver.
- Electrons: Inside your phone, computer and television, you will find tiny pieces of silver.
- The use of solar panels: These are the roof-mounted solar panels that capture sunlight and convert it into electricity.
- Battery: Certain batteries require silver in order to function.
Silver is a precious metal that companies rush to purchase if they need it to make their phones, solar panels or other products. The price will rise. It is referred to as “high demand.”
3. Fear of Safety
Investors can be worried when the world is uncertain. Perhaps they worry about the value of their money (inflation).
People often buy gold or silver when they are concerned about paper currency. Metal is perceived as safer by people because they can actually hold it. Silver prices rise when people buy silver to protect themselves.
The Difference Between Spot Price and Store Price
This is the tricky bit. You can buy silver at a specific price if you know the current spot rate is $25.
The answer to this question is usually no.
You have to pay a “spot” price plus an extra bit when you purchase a coin. The “premium” is the name of this extra amount.
Imagine buying milk from the supermarket. The milk is sold at a very low price by the farmer. The store must pay:
- Milk is transported by trucks.
- Keep your food cold with a refrigerator
- Cash register operators are needed to operate the machines.
- Lights require electricity.
The store will add a small amount of extra charge to milk in order to pay its bills and earn a profit.
The same is true in coin shops. Silver is bought at spot prices, and then sold to you a bit more. The silver must be made into pretty coins, shipped to the shop, and the lights kept on.
What does mean to you when it comes to the spot price for silver? The starting price is what it means. The base price before any fees are added by the retailer.
How Is Spot Price Measured?
The spot price is measured in dollars per troy-ounce.
The “troy-ounce” is an alternative way of weighing precious metals. The ounce is slightly heavier than regular weights of sugar and flour.
- Regular Ounce: Like for food.
- Troy Ounce (only for Gold, Silver, and Special Metals)
When you see the price of silver on a graph, you will know how much it cost in U.S. Dollars to purchase one troy-ounce.
Why should you care?
Understanding the spot price of silver is an interesting lesson about how the market works, even if you don’t buy bars.
This teaches us Demand and Supply. It is this rule that determines the prices of nearly everything from gasoline to video games, houses and even videogames.
You will learn the money language by asking “What does the spot price of Silver mean?” Prices are not just numbers. These are indicators that show us what people really want and how many of them there are.
Conclusion
Spot price is the current, live price per ounce for raw silver.
The price changes constantly because it is traded all around the globe. If people are looking for it or it becomes harder to get, the price will go up. If there’s too much or people aren’t as desperate for it, it will go down.
Remember that the next time you look at a coin of silver, its value is linked to an enormous, global marketplace that doesn’t sleep. You’d be surprised to know that the metal you hold is linked with miners, banks, and factories all over the world!
Ask a parent for help in finding a live silver price chart online. Watch the number ticking up and down like on a scoreboard