Eastern Standard Time (EST) In Military Hours
The silver spot price fluctuates in response to real-time silver futures transactions happening around the world (more on futures later).
Please click here to customize a silver price history chart.
Knowing the current silver spot price is important since silver bullion dealers use it as a benchmark to price their silver coins and silver bars. Dealers use the term “spot” because full payment is required immediately.
Shipment of the silver bullion product occurs within days once the funds have cleared. Please click here to learn how dealers' silver bullion prices are decided.
The silver spot price is discovered during the auctioning of silver futures on commodity exchanges.
A silver futures contract specifies a price in the present that is paid during a future delivery month.
COMEX (Chicago and New York) facilitates the largest volume of silver futures transactions in the world. So it contributes significantly to the discovery of the silver spot price.
New York and World Silver Prices
The New York silver spot price is discovered during COMEX’s “open outcry” (live auction) in New York City and electronically via Globex (also COMEX) from 8:25 AM to 1:25 PM (EST) - and after hours on Globex until 5:15 PM.
Discovery of the world silver spot price incorporates futures pricing from other international exchanges in addition to COMEX.
Due to the many time zones, the world spot silver price is continuously updated from Sunday evening thru Friday afternoon.Sponsored Link
Market (spot) prices are gleaned from futures traded in nearby contract months. The operative word is “nearby” meaning a close contract month when delivery of the silver is completed.
However, since some nearby contract months have very low trading volumes, exchanges discover spot prices from nearby “active” or “base contract months” with higher volumes.
A small percentage of silver futures contracts result in actual delivery of silver bullion. Please click here and tell us what you think would happen to the silver spot price if a majority of traders started requiring delivery of their silver bullion?
Buyers and Sellers Determine Market Prices
Playing in the background during futures trading sessions (auctions) are the buyers’ and sellers’ expectations of future silver prices -- and their interpretations of events that impact those prices.
Each buyer’s primary goal is to buy silver futures at the lowest possible price. He/She is competing against other buyers with the same agenda, and vice versa for the seller.
As each party decides what price best serves their self-interests, a market value emerges as a by-product of their price agreement.
An excessive number of sellers (supply) can depress prices. But a surplus of buyers (demand) can cause prices to rise.
Silver fixing is the process of adjusting the price until the quantity demanded is relatively equal to the quantity supplied. This practice results in a more efficient allocation of silver. The London fix price for silver, an alternative to the silver spot price, is based on this concept.
Since the advent of electronic trading, silver futures trading sessions are global and can last virtually 24 hours/trading day … resulting in a near real-time silver spot price that is available day and night.
Long vs. Short
A person/firm with an open short position has contractually agreed to sell silver for a specific cash amount during a future contract delivery month.
On the flip side, a trader is long if he/she commits to buying silver bullion at a future date for an agreed price.
There must be a short position for every investor who is long. Someone has to be willing to sell a silver future before another person can buy it. Both long and short positions are required for every transaction.
Manufacturers that use raw materials (commodities) to make their products are prime candidates for trading futures contracts.
For example, a silver solder company has to buy physical silver to make its products. But it plans to reduce its risks of losing money on the purchase, if after buying the silver, the economy weakens and silver prices drop.
|Silver has superb electrical properties so it’s used in the manufacture of electronics and electrical supplies such as silver solder.|
Falling silver prices would force the solder producer to lower its prices since the electrical supplies industry is competitive. If the company has to lower its prices, it may lose money.
The company assumes investor demand for silver bullion will not counteract the impact of a slowing economy on silver prices.
So the solder manufacturer sells futures of equal value to offset its purchase of physical silver.
As a result, the company can maintain the profit margin on its base material if the silver spot price drops and silver solder prices are lowered.
Additionally, the solder maker in this example can capitalize on falling silver prices by purchasing silver futures to replace the ones it sold.
Selling silver futures to avoid a loss in profits resulting from lower silver prices is called a “short hedge.”
A “long hedge” is silver ownership protection from rising prices by purchasing silver futures.
Unlike buyers who use silver to make products, speculators are primarily interested in earning a profit when silver prices change.
For example, it’s the month of May and Trader A (speculator) believes silver prices will trend downward over the next four months.
So Trader A enters into an agreement to sell silver in September for $150,000.1
Once again, he/she does so based on the personal view that silver prices will decrease.
Trader B (hedger) is a company that uses silver to make its products, and is concerned silver prices will trend upward by September resulting in higher production costs.
1 NOTE: Assume all silver futures contracts must specify 5,000 oz. of
silver, which is a COMEX requirement.
To eliminate that risk, Trader B agrees to buy the silver sold by
Trader A. Both short (sell) and long (buy) positions are now established.
Each trader decides the duration of his/her open position. The amount of time can range from moments to months.
Silver prices do indeed drop so Trader A agrees to buy silver from another party for $140,0001 to offset (liquidate) his/her short position w/Trader B.
Since Trader A's offsetting contract cost is less than Trader B’s purchase price, Trader A earns a $10,000 profit. Conversely, had silver prices increased, Trader A would have lost money.
Delivery of the silver bullion is not required since the speculator’s original short position was liquidated before the contract’s completion date.
Yes, speculators can make a lot of money, but they can also lose their shorts … no pun intended.
Although they provide liquidity for others like Trader B in the above example, many believe speculators contribute to silver spot price volatility.
Does Silver Actually Trade Hands?
Although the seller is contractually obligated to deliver the silver during the contract delivery month, it rarely happens.
Transactions involving silver futures generally take place on paper
(or electronically) without the silver physically changing locations. Contracts are typically settled before delivery of the silver is required.
1,000 oz. Silver Bar -- Five Bars per COMEX Contract
What do you think might happen to the silver spot price if a majority of silver futures traders with long positions demanded delivery of their silver? What would bring about such a change? Is it likely to occur someday?
Click below to see contributions from other visitors to this page...
Read my comments concerning silver spot price volatility.
Please choose a link from my navigation bar (upper left) to learn more about silver bullion and gold bullion.Return to World Spot Silver Price (Top)
Copyright© 2011 - 2013 GoldBullion-SilverBullion.com. All Rights Reserved.