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Silver Spot Market vs. Futures Market

The silver spot price has continued to rise in the past year and is going strong in 2011, rising to near record highs. Unlike the forward market, which involves dealers buying commodities, paying eventually and receiving them later, the spot market (sometimes referred to as the cash market) is where purchased commodities are to be delivered immediately (within one or two days). The spot price of silver is determined through a system called the bootstrapping method, which estimates a yield-curve that is derived by means of forward substitution, concerning prices of products with coupons.

Future of Silver Spot Price

While silver is generally less valuable than other precious metals, such as gold, platinum, and palladium, this undervalued commodity is projected to face a considerable upswing, as silver is increasingly becoming more scarce. For example, much of the United States’ silver stockpile has depleted: The quantity of silver contained in the above ground supply is only a small fraction of the gold held in its respective reserve.

More recently, analysts have found further reasons to be optimistic about the future of silver investment. As silver investors stand to benefit in the face of both an economic upswing, due to increased industrial demand that stems from the precious metal’s copious industrial and scientific applications, and in economic downswing, because many will hedge by turning to resource investments. Savvy investors have been accruing silver and waiting for “hot money” investors to drive up the silver spot price. Furthermore, with the current economic recession and rise in unemployment, resulting inflation greatly benefits those who own precious metals. Indeed, the spot price silver is soon to rise.