Market Corrections, Crashes & Silver Prices

[SamCW]

Hello all,

Was having a chat to a friend this morning about precious metals as an investment and we got to discussing how well they fare during a severe market correction, particularly silver. I thought this might be an interesting discussion to bring to TSF. Forgive me if this is covered ground.

The gist of our conversation was as follows:

"Yes, a large portion of collectors/stackers are in this for the long haul and many have been in it for a while and we all have our own reasons for investing. It's hard to deny that a lot of people are in it as a hedge against a SHTF scenario and a potential fiat collapse etc, but let's step away from that and ask "what if the market simply goes through an aggressive correction eg 40-50%?" Historically when the market has crashed silver has, more often than not, dropped with it while gold prices have remained relatively stable or have seen a slight uptick. (See attached image) Being that we are due a correction in the market, what are your thoughts and approaches to your current positions in precious metals? Are you keeping any cash on hand to capitalise on a potential price drop? Do you think it will go the other way and silver will perform strongly? With the current GSR being so high, silver is constantly being touted as the 'investment opportunity of a generation'... but what if it's about to take a bit of a heavy hit to the proverbials?"

FYI the majority of my position is in silver. I just though it would be great to see what some of your thoughts on it are? 

 

 

 

[HawkHybrid]

data to suggest that silver might not be the miracle investment

that some forum members believe it to be.

currently my idea is to trade silver and hold gold for the long

haul.

 

HH

[SamCW]

18 minutes ago, HawkHybrid said:

data to suggest that silver might not be the miracle investment

that some forum members believe it to be.

currently my idea is to trade silver and hold gold for the long

haul.

 

HH

@HawkHybrid Thank you for your reply. May I ask what your GSR is roughly? 

[Big23]

I think this is because large investors and the majority of people 'know' that gold is the save haven.

So as long as there is 'only' a financial crises gold will rise and silver may not. But if SHTF like in the 1920s it could be silver that buys you food and stuff you need for everyday life, maybe at least

[Pete]

Personally I cannot see any relationship between the DOW fluctuations and the prices of PMs from this table.
You might add a third column - number of category 4 or higher hurricanes; or audience numbers watching Dancing on Ice; and some analytical guru will make a correlation that has a 50% chance of being correct.

Many of us stackers believe silver is heavily manipulated so a few of us reckon the price is due to rebound especially since the GSR remains artificially high.
All it needs is a big buy from China, Russia, India or a USA financial institution and we will be fastening our seat belts on the way into outer space.
Gold remains a relatively stable hedge against currency collapse globally with silver in its shadow.

To be honest - no one can tell but I would add silver right now ahead of gold which has risen recently so is it near a peak on the rollercoaster cycle ?
 

[KevinFlynn]

While I agree that silver will never be worthless, what I see historically and what I feel in society is that nothing will beat gold as the instinctively chosen investment metal. This is nothing that I would have to look at statistics for. I do believe that gold should be the main wealth preserver - silver is too much of an industrial metal and thus tied to other factors than gold (see what happened to platinum).

I do however believe in silver for speculation, as a bet on a correction. I also like it's relative cheapness for nice and shiny extras (collector coins). And you cannot go wrong with silver as an alternative to fiat. Buying silver to ultimately swap into gold is not the worst plan, but in all honesty, I cannot see a real explosion happen, like silver correcting it's worth a hundred times. But as we have see in the last ten years, it may double (or half).

 

In my stack, am trying to keep a ratio of an ounce of gold to a kilogram of silver, so about 1:32 . I do divert a bit with those extra pieces of silver that catch my eyes, though.

[SamCW]

3 minutes ago, Pete said:

Personally I cannot see any relationship between the DOW fluctuations and the prices of PMs from this table.
You might add a third column - number of category 4 or higher hurricanes; or audience numbers watching Dancing on Ice; and some analytical guru will make a correlation that has a 50% chance of being correct.
 

@Pete Haha audience members watching dancing on ice had me in bits 😂 I do agree with you on the GSR rebound, but how high it will go is of course open to speculation. I, for one, certainly wouldn't complain if it rose significantly.

[SamCW]

23 minutes ago, KevinFlynn said:

While I agree that silver will never be worthless, what I see historically and what I feel in society is that nothing will beat gold as the instinctively chosen investment metal. This is nothing that I would have to look at statistics for. I do believe that gold should be the main wealth preserver - silver is too much of an industrial metal and thus tied to other factors than gold (see what happened to platinum).

I do however believe in silver for speculation, as a bet on a correction. I also like it's relative cheapness for nice and shiny extras (collector coins). And you cannot go wrong with silver as an alternative to fiat. Buying silver to ultimately swap into gold is not the worst plan, but in all honesty, I cannot see a real explosion happen, like silver correcting it's worth a hundred times. But as we have see in the last ten years, it may double (or half).

 

In my stack, am trying to keep a ratio of an ounce of gold to a kilogram of silver, so about 1:32 . I do divert a bit with those extra pieces of silver that catch my eyes, though.

@KevinFlynn I am of a similar mindset. I think 1:32 is a solid ratio and something that I would certainly like to rebalance to... Gotta keep a bit of room for a shiny extra 😎 after all you might as well have some fun along the way!

[HawkHybrid]

I have no idea, and no intention of dwelling in the past.

looking towards the future, I hold some physical silver.

when I feel I should add to physical metal I make

purchases in gold(mostly sovereigns). make of it what

you will but I believe paper trading, futures etc (all of the

dirty, nasty stuff that metals fanatics have told you to

stay away from so that they can sell you physical metal)

is still the way to trade on market fluctuations. you can

go long metals but also (most criminal act ever) short

metals when it's appropriate to do so.

 

work out a strategy.

buy what is likely to increase in value and not what is cheap.

(rubbish is plenty cheap, I don't see people hoarding that

for decades on end, oh wait...)

there's a lot more to trading silver than the gsr.  trades might

take years or even over a decade to turn a profit on physical

silver bullion.

 

HH

[KevinFlynn]

Well, I do have money invested in stocks and bonds (funds), and buy more of them every month. But that is just for diversification, I am not investment savy enough to actually eye a specific market. I am basically leaving this to fonds managers, and just choosing categories like Large Cap or Mid Cap, and established (say, Germany and Switzerland) or emerging (say, China and India).

Precious metals is where my heart is at, so this is where I am willing to put in a little more effort...

Other than that I am a standard working drone, relying on my salary...

 

(I would not want to derail the tread)

[SamCW]

18 minutes ago, HawkHybrid said:

I have no idea, and no intention of dwelling in the past.

looking towards the future, I hold some physical silver.

when I feel I should add to physical metal I make

purchases in gold(mostly sovereigns). make of it what

you will but I believe paper trading, futures etc (all of the

dirty, nasty stuff that metals fanatics have told you to

stay away from so that they can sell you physical metal)

is still the way to trade on market fluctuations. you can

go long metals but also (most criminal act ever) short

metals when it's appropriate to do so.

 

work out a strategy.

buy what is likely to increase in value and not what is cheap.

(rubbish is plenty cheap, I don't see people hoarding that

for decades on end, oh wait...)

there's a lot more to trading silver than the gsr.  trades might

take years or even over a decade to turn a profit on physical

silver bullion.

 

HH

I agree that paper trading is a more effective way of capitalising on market fluctuations. But similarly to Kevin, I’m not savvy enough yet to take a meaningful position with an acceptable margin of safety. I have found physical metals far more accessible while I learn. 

With that in mind, my plan is to stay in physical while I learn, then move across when I am ready. But with a view to maintain some metal. 

In the mean time I can pretend to be a pirate 🏴‍☠️ 

 

[HawkHybrid]

due to the low spread/high liquidity you can trade gold

sovereigns on shorter term fluctuations than you can

with physical silver bullion.

 

HH

[brooklyn99]

Silver bullion is the best investment in my opinion. Just wishing that silver would drop some more.

[AppleZippoandMetronome]

My only real investments are in silver and property. I've never really had an interest in stocks and though i have some gold it is limited to a handful Sovereigns. I wouldn't call myself savvy when it comes to the markets. I have thoughts and opinions as to how things will go but how right I'll be long term... who knows? Silver is a long term investment for me. In an ideal world it will rise in value over time and be the hedge against inflation I want it to be. I have some savings in cash which are only as high as they are at the moment because I'm nervous in the current climate about putting it in to more property as was the original plan - I don't feel comfortable having a large savings in cash.

In the event of severe silver market movement I would be prepared to act if silver dramatically went up or down. If it dramatically went down suddenly I would buy more - significantly more. If it dramatically rose I would try to offload anything I hold that I could get a high price for. My belief in both scenarios will be that it will return to a stable level so I would want to take advantage of any short term benefit that could come my way. If I sold every oz I had because the price sky rocketed I would then buy back in when the price came down. Again I am no expert but from what I've seen large price fluctuations tend to be short lived - I would do all I could to take advantage one way or the other.

[flim]

18 hours ago, HawkHybrid said:

data to suggest that silver might not be the miracle investment

that some forum members believe it to be.

currently my idea is to trade silver and hold gold for the long

haul.

 

HH

when you introduce data points, most likely you would introduced bias to the time frames

the whole thing must be viewed as continuous and the costs involved to switch from one asset to another and the time and opportunity costs

the charts can be plotted in different currencies etc

[Pete]

1 minute ago, AppleZippoandMetronome said:

In the event of severe silver market movement I would be prepared to act if silver dramatically went up or down. If it dramatically went down suddenly I would buy more - significantly more. If it dramatically rose I would try to offload anything I hold that I could get a high price for. My belief in both scenarios will be that it will return to a stable level so I would want to take advantage of any short term benefit that could come my way. If I sold every oz I had because the price sky rocketed I would then buy back in when the price came down. Again I am no expert but from what I've seen large price fluctuations tend to be short lived - I would do all I could to take advantage one way or the other.

We all have theorised at some point in the simplicity of buying on the dips and selling on the peaks but the markets move ahead of our decisions and can often go against us.
Buying coins for example as a hobbyist stacker - if prices collapse then sellers don't sell or the coin price doesn't drop as much as spot.
When silver rises many newcomers pay too high a price, driving up the price so you will find it difficult to buy at a fair price.

Trying to predict the market is a mugs game.
Sometimes you will win but one loss can often wipe out previous gains.
The best strategy is to drip buy and sell if you are inclined to sell.

Many people that buy lottery tickets will never pick a series of numbers like 1, 2, 3 etc on the belief that such a sequence will never occur.
Similarly some people will not choose the numbers from the previous draw.
This thinking is not that different from believing silver will drop, or is due a rise, hesitating to press the buy button on a Sunday evening.

[HawkHybrid]

my interpretation of the data is that it suggests silver mostly

goes down with the stock market during recent big declines.

it just goes down less in %.

with hindsight, what should you have held in 2011, silver

which has dropped ~70% or gold which dropped ~55%?

given hindsight I would hold neither. cash would have been a

better hold.

hence I'm suggesting those holding silver in the hope that

it will buck the trend similar to gold, (should a big drop in the

stock markets occur) should consider recalculating the odds.

 

everyone knows the price of silver is more volatile than gold...

that means it does crazy things. it's a gamble, expecting it to

be predictable when you want it to... (people need to revise

their expectations.)

(I'm not saying that silver won't save you during a crisis, I'm

saying that the actual odds of it happening might change

how comfortable some people might feel about going all in

on silver to save the day)

 

I started all in on silver. the move to only consider gold

sovereigns, for me, is simplicity itself.

 

HH

 

[vand]

Interesting OP.. I guess the historical record is what it is. It would indeed seem that for the majority of crashes, silver behaves like a commodity and gets a walloping alongside stocks. poor silver bugs.

I would be careful about such cherry picked data, though. For example, I think we are all aware of how much better silver did than gold from the bottom of the last crash in Q1 2009, so it's a case of swings and roundabounts. One way to look at it is that you need the price volatility in order to take advantage of cost-averaging strategies, and silver is much better for this than gold

 

[SamCW]

Thank you to everyone that has commented and contributed so far on this thread, I'm glad that it has been of interest to some of you as much as it has to me. Admittedly, it is very cherry picked data as @vand and some others have pointed out. But it serves as basic illustration for the crux of the discussion.