Volatility In Silver and GDX



I recently wrote an article describing the daily volatility in gold and concluded that:

    • Even in powerful bull markets, the gold price will probably go down about 40% of time, based on daily prices, and 30% based on weekly prices.


    • The “bull” will do everything it can to buck you off and force you out of the market.


  • Bull markets never make it easy. By the time it looks easy (say early 2000 in the NASDAQ), it is too late to buy and it is time to exit.

This article extends the same analysis to silver and GDX, the gold ETF.

Are the results similar? See below.


Question: Should I be worried when I see silver or metals stocks go down for several days or even several weeks? Good question! What does the data show?

Big Picture: Examine the long-term chart of prices, and select the bull and bear market periods. Over the past eight years, I separated the silver chart into four completed bull periods and four bear periods. The bull periods are:

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Beginning Ending Total
Calendar Days
% Price
8/30/2005 5/11/2006 254 123%
6/13/2006 3/14/2008 640 114%
10/28/2008 12/2/2009 400 119%
2/5/2010 4/29/2011 448 227%

The bear periods occur between the bull periods.

Quick Summary: Over eight years, there have been four completed bull markets and four bear markets in silver. Each bull market lasted an average of 1.2 years and moved upward in that time by 114% or more.

We tend to think of bull markets as continuous rises in price followed by bear markets in which the price drops relentlessly. Is that accurate? Look at the data!

In the four large bull markets from August 2005 to April 2011, silver went from $6.63 to about $48 (current price is about $29), up a total of 620%. But in those four large bull markets, the daily price went up on average only 60% of the time and down 40% of the time. (Actual data, up 61.9%, 56.7%, 56.2% and 61.0%)

Let me repeat: In the four large silver bull markets since August 2005 (when the bull market really took off), the daily price of silver went up about 60% of the time and down about 40% of the time. Those bull markets were not constructed upon relentless upward moves, but upon chaotic sometimes up, sometimes down moves. On average, the daily upward moves occurred slightly more often than the daily downward moves. Yet, each bull market moved up over 114% in price from beginning to end.


Bull markets include many down days. If we became discouraged every time silver moved down on a particular day, we would live 40% of our life feeling discouraged by the quite common downward moves. Bull markets move up slightly more often than down, and bear markets do the opposite. Think three steps forward and two steps backwards. That is the nature of markets.

So, the next time you feel discouraged by the daily moves in the metals market (or any market), return to your basic analysis and remember:

    • Even in powerful bull markets, the price will probably go down about 40% of the trading days.


    • The “bull” will do everything it can to buck you off and force you out of the market.


    • Bull markets never make it easy. By the time it looks easy (say early 2000 in the NASDAQ), it is too late to buy and it is time to exit.


    • It takes emotional stamina to hold your positions, and it takes determination to maintain perspective. Look at the weekly and monthly trends, look at the fundaments, and look at the sentiment.


    • If “everyone” knows that a market is going up, it is time to exit.


    • If the media is obsessing over a particular market, it is probably time to exit.


    • If your neighbors think you are crazy for buying silver, gold, or their stocks, then it is probably time to add to your position.


  • When your neighbors and your hairdresser are telling you they are buying silver, it is probably time to sell.

Maintain perspective and remember that investing in silver is not easy if you listen to Wall Street or the media or if you become discouraged on the 40% of the days when the price of silver goes down, even during bull markets. Read Ten Steps to Safety.

I did a similar analysis on the gold ETF, symbol GDX. The data is less clear, and the bull and bear periods are open to more interpretation. I started from the low in October of 2008.

Beginning Ending Total
Calendar Days
% Price
10/27/2008 12/02/2009 401 234%
02/04/2010 09/08/2011 581 66%

In those two bull markets from October 2008 to September 2011, GDX went from $16.37 to about $66, up a total of 300%. But, in those two bull markets, the daily price went up on average only 52% of the time and down 48% of the time. (Actual data, up 51.4%, 52.2%)

Keep it simple: As the dollar goes down in purchasing power, gold and silver go up. The dollar’s purchasing power has gone down, on average, every decade for the last 100 years. The actions of the Federal Reserve, printing $85,000,000,000 in new dollars from “thin air” each month, will decrease the purchasing power of the dollar. Hence, buy silver and gold and stocks in silver and gold mining companies. Fool proof – No! Better than most other choices – Yes! Read $100 Silver! Yes, But When?

GE Christenson
aka Deviant Investor

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I am a retired accountant and business manager who has 30 years of experience studying markets, investing, and trading futures and stocks. I have made and lost money during my investing career, and those successes and losses have taught me about timing markets, risk management, government created inflation, and market crashes. I currently invest for the long term, and I swing trade (in a trade from one to four weeks) stocks and ETFs using both fundamental and technical analysis. I offer opinions and commentary, but not investment advice. Years ago I did graduate work in physics (all but dissertation) so I strongly believe in analysis, objective facts, and rational decisions based on hard data. I currently live in Texas with my wife. Previously, I spent 20 years in Barrow, Alaska, the northernmost community in the United States, 330 miles north of the Arctic Circle. There are many parallels between surviving in the arctic and investing for substantial gains in today’s market. For example: - Preparation for surviving arctic weather is critical, just as preparation is essential when investing. - There is little room for delusional thinking when you are subjected to a 40 degrees below zero blizzard while facing 30 mph of wind. Similarly, dangerous markets will punish delusional thinking. - There is much to learn about survival in the arctic, considerably more than just "wear more clothes." Markets appear less complicated and easier to understand than they actually are. Underestimating either arctic conditions or the complexity of markets can be deadly. - Temperatures in the arctic gradually move from dreadfully cold to mildly warm. Markets seem chaotic in the short term but gradually move up and down in long cycles. - One can experience the "midnight sun" for several months in the arctic. During that time, it seems like the sun will last forever. It does not, and several months later you will live through two months of darkness. Bull markets feel like they will rally forever. They do not and are followed by bear markets, regardless of what the Wall Street cheerleaders wish us to believe.

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