We know from history that silver is volatile. Many times, in between those bouts of volatility, it can become downright quiet, even boring. The metal goes through price spikes that can be enormous, yet often short lived. That’s a double-edged sword. But knowing silver behaves this way can make it easier to accept. What’s more, those who harness that volatility can make it work to their advantage. And that is very rewarding.
Between 2002 and 2006, silver dropped 10% or more 4 separate times.
Then, between 2006 and 2011 more short, but sometimes deep corrections followed, with silver dropping 13% or more three times.
Overall, from 2001 until its peak in 2011, silver gave back 20% or more four times. But the real takeaway is that anyone who held on from the beginning enjoyed an astounding 1,080% gain.
The key is knowing whether silver is still in a bull market. That way, you are more willing to sit through corrections, even deeper ones, without selling. But this doesn’t mean you don’t do anything.
Some investors choose to lighten up their exposure to silver by perhaps selling some, or by selling certain silver investments, or portions of those investments. This is all fine and depends on personal risk tolerance. But having and holding a core position makes sense to maintain ongoing exposure.
Major Silver Spikes
When silver awakens, it often soars.
The following chart shows all the major silver spikes since 1973.
These spikes come fast and furious. That doesn’t mean that the price rises dramatically, then automatically gives back all its gains, though sometimes that does happen. Other times, the price moves in a sideways range after rallying. I believe we’re in such a period right now.
For example, silver dropped to $12 in March 2020, then by early August it had spiked to $30. That was a 145% gain in just 5 months. After that huge move, the silver price began digesting those gains, moving in a trading range between about $23 and $28 for over 12 months. In my view, silver’s been building a new base as it prepares to run higher.
This table averages all the spikes shown in the earlier table since 1973.
For me there are two main takeaways. In order to benefit from these spikes, you need to be invested. And when they come, they can make for excellent opportunities to lock in profits and reduce your risk. That allows you to raise capital and wait for the next inflection point. When sentiment weighs against silver, that signals it’s time to take advantage of bargains and buy oversold silver stocks.
There will be opportunities to lock in profits along the way, especially in silver stocks, but you also need to have a core position you’re willing to hold through corrections for maximum gains.
And with silver’s recent weakness, it’s looking more and more like this is the inflection point that allows you to initiate or add to positions. I think silver’s preparing for another move higher that will take it well beyond $30 as it inevitably breaks out of its current trading range.
Peter Krauth is a former portfolio adviser and a 20-year veteran of the resource market, with special expertise in precious metals, mining and energy stocks. He is editor of two newsletters to help investors profit from metal market opportunities: Silver Stock Investor, www.silverstockinvestor.com and Gold Resource Investor, www.goldresourceinvestor.com. In those letters Peter writes about what he is buying and selling; he takes no pay from companies for coverage. Peter has contributed numerous articles to Kitco.com, BNN Bloomberg, the Financial Post, Seeking Alpha, Streetwise Reports, Investing.com, TalkMarkets and Barchart, and he holds a Master of Business Administration from McGill University.
"Hi Peter, I am very enthused about your Silver Investor newsletter and have very much enjoyed your writing thus far."
"I enjoyed your presentation. I especially liked the analysis showing that the price of silver stocks are growing faster than the price of physical silver. I think seeing it on a monthly basis would be a continuous signal to continue buying silver stocks."