This article explores the answer to the simple question: What drives the price of silver over time? At Permutable AI, we’ve dedicated considerable resources to understanding these dynamics through our AI-driven news sentiment analysis and also through our in-house testing of our Trading Co-Pilot (BETA), and we’re excited to share our insights with you.

First, let’s consider the role of inflation

As with most things in economics, the relationship between inflation and silver prices isn’t straightforward. Initially, one might assume that higher inflation always leads to higher silver prices. The reality is that while inflation often drives investors towards precious metals, other factors can complicate this relationship.

Inflation and its relationship to the price of silver over time 

As previously mentioned, one of the most significant factors affecting the price of silver over time is inflation. As a store of value, silver often sees increased demand during periods of high inflation or economic uncertainty. When fiat currencies lose purchasing power, investors tend to flock to precious metals as a hedge against inflation.

But look how this relationship played out historically. During the high inflation years of the late 1970s and early 1980s, silver prices reached unprecedented levels. However, it’s the same story on many economic indicators – the relationship isn’t always direct or predictable.

Interest rates – a balancing act

Which brings us to interest rates. There’s a reason why they play a crucial role in determining the price of silver over time. Generally, there’s an inverse relationship between interest rates and silver prices. When interest rates are low, the opportunity cost of holding non-yielding assets like silver decreases, making it more attractive to investors.

In stark contrast, when interest rates rise, investors might be tempted to move their money into interest-bearing assets. But while this might suggest a simple inverse correlation, our real-time news sentiment analysis against silver prices indicates a more nuanced relationship. These concerns also shape investor behaviour in complex ways, often influenced by broader economic outlooks and geopolitical tensions.

Technological and industrial demand 

Unlike gold, silver has significant industrial applications, which greatly influence its price over time. The demand for silver in various technologies has evolved dramatically over the years, creating interesting patterns in its price movements.

Now, nearly a century after the dawn of modern photography, silver’s industrial uses have shifted dramatically. Today, silver is a crucial component in solar panels, electronics, and medical applications. This isn’t just because of its conductive properties, but also due to its unique antibacterial characteristics.

As for the future of silver demand, you get a sense that the renewable energy sector, particularly solar power, will continue to be a major driver. All this means that we anticipate potential upward pressure on silver prices as the world moves towards cleaner energy solutions.

Supply dynamics

Now for an aspect that’s frequently overlooked: supply dynamics. Silver mining is often a byproduct of mining other metals, which means its supply isn’t always directly responsive to its price. In this scenario, changes in the production of base metals like copper, lead, and zinc can have significant impacts on silver supply and, consequently, its price.

Geopolitical factors influencing the price of silver over time

Ever since silver became a traded commodity, geopolitical events have caused sudden and dramatic shifts in its price. Trade tensions, political instability in major silver-producing countries, or global crises can lead to rapid price fluctuations. That sounds like a recipe for volatility, and indeed, it is.

Factors influencing the price of silver over time: An interplay of factors

One thing is clear, these insights show us that the price of silver over time is determined by the complex interplay of all these elements. At Permutable AI, we’ve developed sophisticated models that account for these multiple variables and their interactions, allowing us to provide more accurate insights into silver price trends which will be available through our Trading Co-Pilot.

Stay ahead with Permutable AI’s Trading Co-pilot

Understanding the factors that influence the price of silver over time is crucial for anyone involved in the precious metals market. The concern for people in the industry is not whether these factors matter, but how to effectively track and interpret them. And that’s before we address the challenge of turning this information into actionable trading strategies.

For now, our Trading Co-pilot is exclusively available to select corporate BETA testers. If you’re interested in gaining early access to this powerful tool and supercharging your approach to silver trading, secure one of our limited spots by emailing enquiries@permutable.ai or contact us via the form below.

Get in touch