Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench
Gold & Silver Prices in

Bipolar Silver: How to Profit

IMG Auteur
Published : February 12th, 2013
792 words - Reading time : 1 - 3 minutes
( 5 votes, 4.8/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...


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.


(Click on image to enlarge)

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 biggest difference between the two precious metals 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.


(Click on image to enlarge)

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.





<< Previous article
Rate : Average note :4.8 (5 votes)
>> Next article
Jeff Clark is the editor of BIG GOLD, a Casey Research publication focused on the safest ways to profit from the current bull market in gold.
Comments closed
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
Silver Demand Ready To Explode
10 DecS W.
Same old, same old story from AH. Silver is going to go to the moon. Buy it while you still can. So you can make a lot of dollars when ...
Gold coins: the United Kingdom´s...
08 Decflup
I think that Estonia is VAT free for legal tender silver.
The Deepening Deep State
10 DecJim C.
Kunstler wasn't concerned about 'The Deep State' when he voted for Obama...since Obama's agenda seemed to coincide initially with Kunstler's own. ...
Documents Prove Massive Rigging ...
09 DecThe Recusant
Yes, yes. the PMs are manipulated. Perhaps some bank will have its wrist slapped. Then everything will return to normal. More price fixing and bank...
Silver Demand Ready To Explode
09 DecThe Recusant
Sorry Andy, but I don't believe in Santa anymore either. Believing silver "must" explode is no different than the market "must" implode. I've been ...
Guest Post: How to Trigger a Sil...
09 DecThe Recusant
Well, there you have it. Blatant manipulation and cover up by the CFTC and DOJ. So, what else is new? Let's see what Trump will do to stop this! [s...
Indian demonetization effect: 15...
09 DecJ T.
From reading the comments at the end of the article mentioned above in economictimes.indiatimes, the people who read it, if they actually did, are ...
India Confiscates Gold, Even Jew...
09 DecJ T.
Hopefully the naive, or ignorant, or worse, willfully ignorant, who have swallowed (once again) the MOP's lie (that's the Ministry of Propaganda......
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS