Silver shows similar volatility to stocks: Should you pick gold or silver?

Silver, like Indian stocks, can experience large price changes, according to a report by Motilal Oswal Private Wealth (MOPW) released on November 25, 2024. The report shows that between 1990 and October 2024, silver’s price has been just as volatile as Indian stocks.

 

Volatility: The price of silver has fluctuated by about 26.6% each year, which is similar to Indian stocks at 26.8%.

 

Biggest Losses: The biggest drop in silver prices was 54%, which is close to the 55.1% loss seen in Indian stocks during their worst periods.

 

"The standard deviation for Silver is 26.6% which is similar to Indian equities at 26.8%. The maximum drawdown of silver is at -54% which is close the maximum drawdown of -55.1% in Indian equities," noted the study.

   

In terms of returns, silver has grown by 7.6% on average per year (CAGR) since 1990. Indian stocks, on the other hand, have grown faster, at 14% per year over the same period. Gold, in comparison, has seen better growth than silver, with a 10.6% average annual return and less price fluctuation.

 

Summary of Key Data (1990 - 2024):

Indian Stocks (Equity):

 

• Average annual return: 14.0%
• Price fluctuations: 26.8%
• Biggest loss: 55.1%

•  

Gold:

• Average annual return: 10.6%
• Price fluctuations: 14.7%
• Biggest loss: 25.1%

•  

Silver:

• Average annual return: 7.6%
• Price fluctuations: 26.6%
• Biggest loss: 54.0%

 

While gold has been a better performer and is a good option for long-term investments, silver is more suitable for short-term or tactical investments due to its higher price swings. 

 

Note: STD is based on monthly returns, *CAGR is for period 1990 to 31 Oct’ 24; st . Equity-IND is represented by Sensex from 1990 to 2002 and Nifty 50 from 2002 onwards; MCX Spot Gold price in INR from 2006 till date; S&P 500 in INR 1990 onwards; Silver – USD Silver converted in INR. Disclaimer: Past Performance is no guarantee of future Results

 

The recent fluctuations in gold and silver prices can be attributed to several global events, particularly the US Presidential Election. Interestingly, gold tends to do slightly better before a Republican president is elected and remains flat post-election. Conversely, it underperforms before a Democratic president's election and tracks slightly below its long-term average thereafter. Despite these trends, the variability in outcomes suggests that gold's performance is more closely tied to the policies of the elected administration rather than the party affiliation itself.

 

"Gold and silver posted impressive gains this year amid rising geopolitical conflicts and uncertainty around US Presidential election till Oct’24. But some of that momentum has been lost in early November. Trump's economic proposals on tax cuts and tariff hikes led to expectations of aggressive fiscal policies, which in turn resulted into hardening of US treasury yields, rise in dollar index and hence dampening the investor enthusiasm for gold and silver. Federal Reserve's mixed signals on future interest rate cuts and China’s policy announcements falling short of expectations have further put some pressure on bullions," added the study.

 

Looking ahead, the gold and silver are poised to navigate through diverse influences. Factors such as the US administration's economic policies, the Fed's stance on monetary policy, and broader geopolitical risks will be key in shaping the future direction of gold and silver prices.