Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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

© 2005-2022 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