Let check out how gold and silver did compare to investing in the stock market in this case – S&P500 during the month of May.
First, notice that during May there was a strong linear correlation between silver and gold prices and S&P500.
The chart below shows the linear correlation of the daily percent changes between silver price and S&P500 and gold price and S&P500 during each month since December 2010, a high rate indicates a strong linear correlation (i.e. as the S&P 500 inclined so did gold and silver prices rose and vice versa, as is this case in May.
In the previous months there were close to zero correlations between the precious metals and S&P500 daily percent changes.
This finding might indicate that the declines of these metals and S&P500 might be stem from similar causes, such as the changes in the US dollar compared to major currencies during May.
The chart below shows the daily changes of normalized S&P500 and gold and silver prices (100- May 2nd, 2011).
The chart shows that S&P500 and gold prices declined very moderately at the beginning of May, while silver prices fell very precipitately; by the end of the month all these indexes gained back some of their value, but silver price remained very low compared to the beginning of May.
By May 27th gold price was 1.2% below its initial price level at the beginning of May; silver price was nearly 18% below its initial value; S&P500 fell by 2.2% compared to its price level at the beginning of May.
The volatility of gold price daily percent changes had a standard deviation of 0.95%, silver price had 4.33% and S&P500 had 0.65%.
These findings show that during May gold outperformed the S&P500 by a very small margin, but demonstrated a higher volatility; silver did worse than both the abovementioned indexes.
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For further reading (in this site):
- Weekly outlook for May 30 to June 3
- Gold & Silver Price – Daily Outlook 31 May
- Is gold a good investment in 2011 (so far)?