Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
What ECB’s Tiering Means for Gold - 17th Nov 19
DOJ Asked to Examine New Systemic Risk in Gold & Silver Markets - 17th Nov 19
Dow Jones Stock Market Cycle Update and are we there yet? - 17th Nov 19
When the Crude Oil Price Collapses Below $40 What Happens? PART III - 17th Nov 19
If History Repeats, Gold is Headed to $8,000 - 17th Nov 19
All You Need To Know About Cryptocurrency - 17th Nov 19
What happens To The Global Economy If Oil Collapses Below $40 – Part II - 15th Nov 19
America’s Exceptionalism’s Non-intervention Slide to Conquest, Empire - and Socialism - 15th Nov 19
Five Gold Charts to Contemplate as We Prepare for the New Year - 15th Nov 19
Best Gaming CPU Nov 2019 - Budget, Mid and High End PC System Processors - 15th Nov 19
Lend Money Without A Credit Check — Is That Possible? - 15th Nov 19
Gold and Silver Capitulation Time - 14th Nov 19
The Case for a Silver Price Rally - 14th Nov 19
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19
Gold and Silver - The Two Horsemen - 11th Nov 19
Towards a Diverging BRIC Future - 11th Nov 19
Welcome to the Zombie-land Of Stock Market Investing - 11th Nov 19
Illiquidity & Gold And Silver In The End Game - 11th Nov 19
Key Things You Need to Know When Starting a Business - 11th Nov 19
Stock Market Cycles Peaking - 11th Nov 19
Avoid Emotional Investing in Cryptocurrency - 11th Nov 19
Australian Lithium Mines NOT Viable at Current Prices - 10th Nov 19
The 10 Highest Paying Jobs In Oil & Gas - 10th Nov 19
World's Major Gold Miners Target Copper Porphyries - 10th Nov 19
AMAZON NOVEMBER 2019 BARGAIN PRICES - WD My Book 8TB External Drive for £126 - 10th Nov 19
Gold & Silver to Head Dramatically Higher, Mirroring Palladium - 9th Nov 19
How Do YOU Know the Direction of a Market's Larger Trend? - 9th Nov 19
BEST Amazon SMART Scale To Aid Weight Loss for Christmas 2019 - 9th Nov 19
Why Every Investor Should Invest in Water - 8th Nov 19
Wait… Was That a Bullish Silver Reversal? - 8th Nov 19
Gold, Silver and Copper The 3 Metallic Amigos and the Macro Message - 8th Nov 19
Is China locking up Indonesian Nickel? - 8th Nov 19

Market Oracle FREE Newsletter

How To Buy Gold For $3 An Ounce

Embrace Silver Price Volatility All the Way to the Bank

Commodities / Gold and Silver 2013 Feb 20, 2013 - 10:30 AM GMT

By: Jeff_Clark

Commodities

Most precious-metals investors know that silver is more volatile than gold. But do they know just how big that difference really is?

We thought it would be interesting to measure how much greater silver's daily moves are – both in gains and declines – than gold.

We documented the daily price movements for both metals, and then calculated the difference using absolute values. To interpret the charts below, you need to know that:


  • Values above zero represent days when silver had a greater percentage move than gold, as depicted in gray.
  • Values below zero are days when gold moved more than silver, as depicted in orange.
  • The values don't tell us the direction of price movements, only how much they differed between each other on any given day.
  • The darker horizontal lines represent the moving average of the price differences for each metal.

With that in mind, here are the differences in daily price movements between silver and gold, measured in percentage points.

The chart is very busy, but it clearly shows that silver's daily price movements, more often than not, have been greater than gold's. In fact, from January 2003 through last week, silver's movements were larger 71.5% of the time. Regardless of the direction of precious metals on any given day, silver had a greater percentage move than gold roughly three out of four days.

Further, you'll notice that the magnitude of silver's movement have been much greater, too. On average, silver's price movements exceeded gold's by 1.3 percentage points, while on days gold had the bigger move the average was 0.81 percentage points. The moving averages easily show this.

Here are some of the more extreme examples. On May 12, 2011 (silver's biggest spike in the chart), gold rose 1.23% – but silver soared 17.05%. The day gold had the biggest percentage move more than silver occurred on December 2, 2008; gold rose 0.26% to silver's 5.05% decline.

So, is this greater volatility in silver normal? And what might we expect when the Mania Phase of this bull cycle kicks in?

The following chart maps the daily difference in price movement between gold and silver from January 1971 through December 1980.

In the last big precious-metals mania, silver also logged bigger one-day movements than gold, in this case 63.5% of the time. On average, silver gained or lost 1.41 percentage points more than gold. When gold outperformed silver, roughly one-third of the time, the average percentage-point difference was 0.81.

You'll notice another interesting point. When the market entered the Mania Phase, silver's bigger one-day movements over gold's grew even bigger. During the 1979-1980 period, silver outperformed gold by an average of 2.46 percentage points, almost double what it did before the mania. In contrast, gold's average remained the same during the entire decade – 0.81.

Some of the more extreme examples include September 18, 1979, where gold rose by 6.82% and silver soared 36.59%; and March 27, 1980, where gold fell 4.38% and silver dropped 18.58%.

What Are the Implications for Investors?

On average, silver rises higher and falls further than gold. This is true as much today as it was in the 1970s. The difference has reached as much as 15 percentage points during this cycle, while it hit 30 during the last mania. This means that investors:

  1. Must be able to stomach the bigger moves, regardless of the direction. If you have a tendency to get emotional about your investments, you may want to reduce your exposure to silver.
  1. Have an opportunity to get better prices on silver than gold. If you buy during the downdrafts, you will likely reap a bigger percentage gain than gold, as history has shown.

The historical record tells us that when we enter the mania, silver's volatility will increase. If we have a similar period as in 1979-'80, we can reasonably expect volatility to double over current levels. This will be the result of more investors joining the precious-metals industry. The moves will, on some days, be breathtaking. So again, one must be prepared emotionally to handle the volatility, as well as be more nimble when it comes to buying and selling.

Since current volatility is roughly half what it was during the last mania, we have yet another piece of evidence that indicates we're not in a bubble. Yet. Ignore those who claim otherwise; you still have time to enter this market.

It also means that when silver resumes its uptrend, the producers will outpace the metal by a wide margin. The "snapback" in silver stocks should be tremendous – but not every company will benefit equally, as not all producers have the same profit potential, political exposure, management prowess, and growth prospects.

There's a little-known anomaly in the precious-metals market that key institutional investors are using to buy deeply discounted gold. But you don't have to be big-time investment firm to take advantage of it. Details here.

© 2013 Copyright Casey Research - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Casey Research Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules