Silver Futures
Many people consider silver futures an inflationary hedge when the economy takes a dip. Investors think of silver futures as an insurance cover to protect themselves as the values of currencies weaken. The large fluctuations experienced in major world currencies in the last few years has compelled investors to buy silver futures and options, physical silver and silver ETFs to protect their investments. This increase in demand has pushed the price of silver futures high.
Silver has many uses. For instance, manufacturers use it to make flat screen TVs, cell phones, bearings, batteries, catalysts, soldering, batteries, solar panels and photography among other areas. This has increased the scarcity of this precious metal. It is too uneconomical to try to recycle the silver used to make electrical components. So when the electrical component is damaged, it is usually thrown away with the silver intact. In the last twenty years, the industrial demand for silver has increased considerably. During the same period, the global demand for silver futures was greater than its supply. According to many people, silver is both an industrial metal and a precious metal.
Almost every country in the world is facing economic problems. Many governments have lowered interest rates to deal with these economic problems. It is a well known fact that a low interest rate lowers the value of currencies. To deal with the deflationary environment in the U.S and the entire world, interest rates will be kept low but more money will continue to be printed. This will result in a hyper inflationary cycle. This will weaken the Dollar further. The end result will be increased commodity prices because the US Dollar is normally used in international trade.
Investing in silver ETFs may also help to increase the price of silver futures as investor try to find a hedge against inflation and the weakening US Dollar. Investors can only bet on higher prices of silver metal in the future but never on lower prices. These funds are normally used to offset their respective silver ETF purchases by individuals with either the purchase of the appropriate quantity of long silver futures contract or purchase of physical silver.