Silver, often called the white metal, is traded in dollars and cents per ounce, with market activity taking place worldwide and at all hours of the day. Key commodities markets like New York, London and Hong Kong are just a few locations where it changes hands. London is the center of physical silver trade, while the COMEX division of the New York Mercantile Exchange is where most paper trading is done.

Physical silver is sold on the spot market, meaning that buyers pay a specific price for the metal and then have it delivered immediately. Paper trading is done via the futures market, with participants agreeing for the delivery of silver in the future at an agreed-upon price. In such contracts, two positions can be taken: a long position to accept delivery of the metal, or a short position to provide delivery of the metal.

Paper trading might sound like a strange route to take, but it can provide investors with flexibility that they wouldn’t get from buying and selling physical silver. The most obvious advantage is perhaps the fact that trading in the paper markets means market participants can benefit from holding silver without needing to store it. Furthermore, futures trading can offer more financial leverage in that it requires less capital than trading in the physical market.

In terms of historical price action, silver’s highest average annual price was $35.12 per ounce in 2011. The rise came on the back of very strong silver investment demand, and was more than double the 2009 average silver price of $14.67.

Like other commodities, silver’s price is most heavily influenced by supply and demand dynamics. The silver price is a little unique, however, in that it’s known for its volatility. That characteristic is partially due to the fact that the metal is subject to both investment and industrial demand. In other words, it’s bought both by investors interested in using it as a store of wealth and by manufacturers looking to use it for different applications. Those applications are incredibly varied – silver has diverse technological applications and is used in devices like batteries and catalysts, but it’s also used in medicine and in the automotive industry.

Looking at supply, in 2014, the world’s top three producers of the metal were Mexico, China and Peru. Interestingly, even in those countries the white metal is usually produced as a by-product – for instance, a mine producing primarily gold might also have silver output.

As a final note, it’s important for investors to be aware that price manipulation is a major issue in the silver space. JPMorgan Chase (NYSE:JPM) was long at the center of such claims, though the case against it was dismissed last year. Most recently, 10 banks were hit in a US probe on precious metals manipulation.

While that might sound disheartening, key industry figures like silver guru David Morgan have emphasized that in reality the silver market is no more manipulated than any other market. Furthermore, in 2014 the London Silver Market Fixing stopped administering the London silver fix, which had been used for over a century to fix the price of silver. It was replaced by the LBMA Silver Price, which is run by the LBMA, CME Group (NASDAQ:CME) and Thomson Reuters (TSX:TRI,NYSE:TRI), in a bid to increase market transparency.

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