The Illusive Silver Spot Price and Crushing Sentiment

The silver spot price should represent the price determined when users and producers come together and bid on neutral ground using an agree upon, or uniform amount or weight of the commodity in question.

The silver spot price or current price should be a whole sale price representative of the real physical supply and demand of the metal.

However, rather than a physical market setting the price, the fact remains that all retail transactions for physical bullion in the US key off a 'spot price' that is derived from a paper market, not based on the currently available physical supply.

The spot price changes on a regular basis, just as stock prices do, and reflects the bid and ask prices quoted by wholesale dealers for spot delivery.

The spot price in relation to futures markets and trading?

Futures markets or where the silver spot price and a host of other commodities are traded were set up as a place for producers and users to come together and find fair market value using a uniform and predictable contract.

In other words, one might bid on the future price of a contract depending on the needs of the user or the expected production of the producer (a miner in the case of silver).

The COMEX, owned by the for-profit, CME, or Chicago Mercantile Exchange is the most important price discovering exchange in the world.

Instead of largely consisting of users (industry and jewelry fabricators) and producers, the CME is now dominated by speculative entities (bullion banks) who rarely take delivery, but instead almost always settle for cash. They effectively use the underlying asset as a basis to trade other derivatives such as options or interest rate derivatives.

The Most Important Thing To Remember About The Silver Spot Price

We should keep in mid that the spot price follows the futures front month (or closest active trading month) by a calculation is more in line with that of a Net Asset Value or NAV used in calculating the premiums for one share of a fund -- like the <a href="">PSLV.</a>

On the surface, silver seems to be a simple commodity used in a lot of industrial processes that also used to be money that has some unbelievably bullish characteristics.

However, when it comes to investing, and the question of what, where, and how to buy and sell, there is vast confusion and emotion usually gets the best of silver investors before they even get started.

Check out our free guide to learn more.

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