Happy Sunday, GoldBuzzers!

There’s no doubt that gold and silver have generated excellent long-term returns. But one of the harshest realities for precious metals investors is the depth of the drawdowns we have to ride out. Especially with silver. Over the past 25 years, gold has dropped as much as 44.6%. Silver has dropped as much as 75%. Silver gave us another reminder this week, and several of you have written in over the past few months, since the January peak, asking how to handle these periods.

Today is Part 2 of the series I started last week on managing your risk in precious metals. In Part 1, we looked at gold and what simple filters can and can't do for the worst drawdowns. Today we move to silver, where the numbers get much bigger.

Ok. Let’s get into it. ⬇️

Gold lost 3.8% on the week as hot inflation data crushed whatever was left of rate-cut hopes. April's wholesale prices surged at the fastest pace since 2022. Consumer prices posted their biggest jump since 2023. The culprit is crude oil, up more than 40% since the Iran conflict erupted, with WTI now above $100 a barrel and the Strait of Hormuz still largely shut to tanker traffic. Markets have fully priced out a Fed cut this year, and close to 30% of traders are now betting on a hike by December. The New York Fed's Empire State Manufacturing Index didn't help either, surging to 19.5 in May against expectations of 7.3 - more fuel for the higher-for-longer crowd.

Meanwhile, silver got hit harder. It dropped more than 8% on Friday to close the week under $76, extending a brutal 15% two-day selloff after trading above $89 on Wednesday. UBS cut its full-year silver investment demand estimate from over 400 million ounces down to 300 million and slashed its supply deficit forecast from 300 million ounces to just 60-70 million. India also raised import tariffs on both metals to 15% from 6%.

On the geopolitical side, President Trump met with Xi in Beijing, with Trump claiming Xi agreed to help with Iran. Xi flagged progress on trade but warned that Taiwan disputes could still risk conflict. It was the kind of week where everything that could go wrong did - but none of the structural reasons people own precious metals have changed.

It was late October 2008 when I first walked into my local bank and said “I’d like to buy some silver.” It was the start of a rollercoaster ride which changed the course of my life.

Against the backdrop of a world financial crisis and looming bank failures, Silver had just dipped under $10 an ounce, having been double that price a few months earlier. To me, it looked like a screamingly good buy. I’d thought the bank might be able to sell me some coins. It turns out they offered me 1,000 ounce silver bars (weighing almost 70 pounds, 31 kilos.)

Over the next couple of years, I became the bank’s most regular precious metals customer, coming in every few weeks for “my usual” and leaving with another 1,000 ounce bar in an increasingly battered roller board suitcase! Meanwhile, the price kept rising: $12, $14, $16, $18, $20, $30 and beyond. I also bought mining stocks.

By April 2011, silver was almost $50 and some of those bars were now worth five times what I’d paid for them just over two years before.

But as I discussed last Sunday, in Part 1 of this series, I didn’t have a trading plan, or any form of risk management, and was simply operating on instinct and watching the news.

As the price started falling over the following months and years, I eventually liquidated all of my positions. It was the pain of that experience that made managing risk the central focus of the Theseus research project, and the heart of my investing strategy today.

The unfortunate truth is that if you bought silver near the highs in April 2011, your position was underwater until October 2025. Yes, fourteen and a half years.

That’s the headline number for silver, and it’s the reason this second piece in the series is even more important than the first. Gold’s drawdowns are painful but generally survivable. Silver’s worst declines have been brutal enough to end almost every retail position.

Last Sunday, I outlined why this matters so much: drawdowns aren't symmetric, and the deeper the hole, the more disproportionate the climb out. A 50% loss needs a 100% gain to recover; a 75% loss needs 300%. We saw how simple moving average filters reduced gold's worst drawdown from 45% to around 32%. With silver, the case for risk management becomes impossible to argue against.

Silver holders just lived through this again. Silver hit an intraday high of $121.64 on January 29th this year. By March 23rd it had crashed to $60.94. A brutal 50% drop in less than eight weeks. 

One of the key lessons I learned in the years that followed the 2011 peak: drawdowns in a brokerage account are much harder to bear than losses in the value of physical assets. When you log in and watch that number declining for months and years, it takes an emotional toll few can bear indefinitely. Aside from owning some core physical gold and silver, it's why I don't recommend a buy-and-hold strategy in a trading account to anyone.

Last week we looked at Gold.

Silver across the same 25-year window, from 2001 to 2025, earned an annualised return of 11.6%. Gold earned 11.8%. The two metals are nearly tied on the upside.

The drawdown cost is where they diverge significantly. As discussed last Sunday, Gold’s maximum drawdown over that period was 44.6%. Silver’s was 75%, and as we’ve seen, that April 2011 peak wasn’t recovered for fourteen and a half years.

Most retail positions simply don’t survive that test. They sell at the bottom or near it, accept the loss, and stop participating. The cycle turns and they miss the next leg up. The 11.6% buy-and-hold return on silver assumes you held through that fourteen-year stretch. Few people did.

What simple filters do for silver

So what do simple risk management filters look like applied to silver? Let’s look at how they can boost returns.

First, a quick reminder on these numbers. The first metric, CAGR (compound annual growth rate), is the smoothed annual return that takes the start price to the end price. Buy and hold silver from 2001 to 2025 and your CAGR was 11.6% per year.

But CAGR alone misses something important. If a system is only invested half the time and earns the same dollar return as buy-and-hold, your capital is working twice as hard during the days you're actually invested in the market. Therefore, I like to use the exposure-adjusted CAGR which measures this. It tells you what your capital is earning per year of actual market exposure, rather than per calendar year. It's the cleanest way to compare systems that spend different amounts of time in cash.

The above chart shows the Exposure-Adjusted CAGR for Silver, and there’s a curiosity in the numbers worth looking at. The 50/200 crossover (when the 50-day moving average crosses above the 200-day moving average) delivered 17.3% per year of exposure on silver, a strong number, significantly higher than what the same filter did on gold. The catch is that it came with a 60% drawdown. It’s a useful reminder that no single metric tells the whole story. A high exposure-adjusted return paired with an unacceptable drawdown is still an unacceptable system.

So, what about limiting those brutal drawdowns?

The 200-day moving average cut the worst drawdown from 75% to 57.6%. The 50/200 crossover got it down to 60.1%. The 10-month moving average rule managed 63.2%. All three are meaningful improvements over buy-and-hold, and any of them is better than nothing.

But none of them solve the core problem. In practice, a 58% drawdown is still going to push most investors past their breaking point. The simple filters reduce the worst-case experience by roughly a quarter, which is real, but they don’t transform silver into a position most of us could comfortably hold through a full cycle.

The reason I spent years researching dedicated precious metals systems and now use them for my own silver investing is that they're the only way I've found to reduce silver's risk to a level I can personally live with.

Specifically, I use the Min Risk strategy to manage my own silver positions today. From 2001-2025, Min Risk’s exposure-adjusted CAGR is a very healthy 34.8%, with a maximum drawdown of 29.5%. The Max Return strategy delivered 25.4% (with higher absolute returns) and a 37.4% drawdown. The full 25-year results are on the silver systems page.

The chart above makes the gap between approaches clear. Buy-and-hold and the simple filters cluster in the lower-left region of the map: high drawdowns, modest returns per day of exposure. But the filters are all measurably better than buy-and-hold. As you’d expect, the INSIDER systems sit in a separate region of the chart entirely, showing a significantly better risk-reward balance.

The reason should be intuitive at this point. A single moving average rule is fundamentally limited. It can only respond to one timeframe and one signal type. Silver’s volatility profile, with its much sharper swings and deeper crashes, requires more than that. The systems I use today came out of the original Theseus research. They combine signals across multiple timeframes, designed specifically for silver’s volatile temperament.

But whatever type of approach you choose, the importance of moving away from just trading on instinct is undeniable.

In my view, the silver pattern is a lot clearer than it was with gold. Where simple filters made gold meaningfully more survivable, they reduce silver’s damage but don’t fix the problem. The data demonstrates the limits of single-rule risk management on a market as volatile a silver.

If you hold silver investments and don’t have a plan for another 50%-plus drawdown, the data shows you will face that reality again at some point. A 200-day moving average rule is the minimum-viable solution and is dramatically better than nothing.

So that’s the story on owning gold and silver bullion. They both offer high reward, but come with high risk - especially silver.

Mining stocks are a different category of risk altogether. In part 3 of this series next Sunday, we’ll take a look at owning gold miners, where equity exposure and operational leverage compound the underlying metal’s volatility.

We’ll see what the data shows next week.

That’s all for this Sunday, folks. See you on Tuesday.

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Rick Adams
Founder, GoldBuzz
rick@goldbuzz.com