Silver exhibits volatility similar to Indian equities; gives CAGR of 7.6% in 34 years: Report

Silver’s volatility over the past three decades mirrors that of Indian equities, says the Alpha Strategist Report by Motilal Oswal Private Wealth (MOPW), however, it is to be noted that the former’s returns have fallen slightly short.

“Silver has provided returns of the CAGR of 7.6% from 1990 to 31st October 2024, Indian Equities have recorded a CAGR of 14.0% during the same period,” said the report.

However, 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 to the maximum drawdown of -55.1% in Indian equities.

(Source: MOPW)

Meanwhile, compared to silver, gold has provided a meaningful CAGR of 10.6% and scores better on account of a recorded standard deviation of 14.7% and a maximum drawdown of -25.1%.

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.

Gold and silver posted impressive gains this year amid rising geopolitical conflicts and uncertainty around the 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 in the hardening of US treasury yields, a rise in the dollar index and hence dampening the investor enthusiasm for gold and silver.

“Looking ahead, gold and silver are poised to navigate through diverse influences," the report added.

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.

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