We can’t get enough of the Olympics, and why they weren’t contested in the remote Hoth system (we joke, we joke). In honor of the 22nd annual Winter Olympic Games in Sochi Russia, we decided to have our chart of the week take a look at the precious metals that millions of little kids dream about biting when they grow up.
We know the metal hierarchy in the Olympics is all about Gold, then Silver, then Bronze (Copper) – and indeed that matches up with the worth of each of those metals and the medal itself, per Saving Advice.
(Disclaimer: Past performance is not necessarily indicative of future results)
(Disclaimer: Since Copper is main metal in Bronze, we’re exchanging the two)
Price Data courtesy: Price Oz
But what if we’re talking not just about the value of the medal/metal, but the value of investing in the metal. We all know which are more expensive, but which have gained more as an investment? We stumbled upon a thorough article discussing just that from the Indexologyblog.
“To any Olympic athlete, gold is the goal; however, that may not be the case for an investor. Let’s take a look at the statistics to see how the metals stack up. Below is a cumulative return chart of gold, silver and copper. Notice over the period that gold has the highest performance with a total of 593% followed by copper and then silver, gaining 452% and 283%.”
(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: IndexologyBlog
It turns out that Gold is still the top precious medal when it comes to returns… while Copper seems to show a higher return over silver. But returns are just one factor. In context of the Olympics, what are the athletes risking to get the medal? It’s safe to assume that the athlete that has the best time on a run, lands the best trick triple axle in figure skating, or pulling off a snowboarding move otherwise never attempted before will get you the gold (the highest return). But on the investing side, is taking the biggest risk to get the biggest reward the best strategy? In sync with our passion for risk management, the article does a great job discussing the risk of the three medals in the world of investing.
“However, few look at returns without considering risk. Over the time frame, risk as measured by annualized volatility was 47.6% for silver, 27.3% for gold and 26.3% for copper. Although silver had both the highest volatility and lowest cumulative return, it had the highest average monthly return, up 112 basis points. This is compared with only 73 bps for gold and 68 bps for copper in an average month. Further, in the average up month, silver had the highest gain of 8.9% versus only 6.0% for copper and 5.2% for gold. One might conclude taking the highest risk can pay off but looking at the downside counts as well. The reason gold had the highest cumulative return was since the average loss in a down month of -3.7% was smaller than for either copper’s or silver’s average monthly loss of -5.0% and -6.6%, respectively.”
While Bronze might not be the most precious, precious metal in the Olympic games, when it comes to investments, Bronze (Copper) offers a lower downside/higher return than Silver, and Gold could be argued as the best overall metal {past performance is not necessarily indicative of future results). As for the Olympics themselves, we’ll be rooting for as many Golds for the U.S. as possible.
P.S — If you’re interested in the Gold commodity conversation, here’s our previous commentary.
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