With silver prices on the rise, many investors are taking a second look at this precious metal. But what reasons are there to make us want to seriously consider this investment option?

It’s still less expensive than gold, but an investment decision has to take into account a lot more than just that one factor. It’s important to keep in mind that, like most commodities, there are lots of things that affect the market price…and that the market price may not always accurately reflect the value of what we’re buying.

The silver market is much smaller than the gold market. It’s still small enough that just a few investors–or even one person– making massive trades and/or having large amounts of money to invest can influence silver prices(1).

Consumer demands, as well as commerce and industrial business, also affect the prices. Silver has numerous uses in commerce and industry. For example, it’s used in purifying water, making wood preservatives, and maintaining food hygiene. Because of silver’s antibacterial properties, it has found uses within the medical field. In addition to these, new uses continue to be discovered.(1). Naturally, when the demand for this precious metal increases, the price of the metal increases, too.

Fluctuations in the demand for silver, as well as a lower market liquidity, make this metal a more volatile investment choice than is gold(1). Market liquidity refers to how easy or difficult it is to sell an asset without significantly affecting the asset’s price and value. For example, cash would be our most liquid asset.

Precious metals are used as a means to hedge against inflation. However, the more money that’s put into circulation, the less valuable our currency becomes. That is, when more money is printed, our dollars are worth less. This cycle can impact the cost of precious metals, including causing an inflationary increase in silver prices.