January 6, 2012

The Volatility of Stocks versus Gold

Lately the stock market has been on a fairly wild ride of ups and downs.   Some people may be thinking that they don't have the stomach for that rollercoaster and choose instead to put their money into gold.   However gold prices can be just as volatile as the stock market.

To compare volatility I decided to compare the monthly high and low prices in 2011 for both gold and the Dow.  I grabbed historical prices for the Dow Jones for 2011 on a monthly basis.   I then go the monthly highs and lows for the spot gold price off the Kitco website.

First the Dow:

January 12,072 11,546 5%
February 12,418 11,893 4%
March 12,423 11,548 8%
April 12,886 12,094 7%
May 12,928 12,272 5%
June 12,569 11,822 6%
July 12,794 12,044 6%
August 12,321 10,589 16%
September 11,733 10,572 11%
October 12,303 10,362 19%
November 12,212 11,193 9%
December 12,357 11,728 5%

The average difference between high and low per month was 8.5%.    In October there was a 19% range between the high and low trading values of the Dow.    February had the smallest range between high and low at only 4% difference.

Here is the data for the gold prices:

January 1388 1319 5%
February 1411 1328 6%
March 1447 1400 3%
April 1535 1418 8%
May 1541 1478 4%
June 1552 1498 4%
July 1628 1483 10%
August 1877 1623 16%
September 1895 1598 19%
October 1741 1617 8%
November 1795 1681 7%
December 1752 1531 14%

The average difference between high and low price for spot gold was 8.7%.   March had the smallest difference between high and low at only $47 or 3% difference from $1400 to $1447.     September had the highest variation and prices ranged from $1598 to $1895 in that month which is about 19% difference.

Comparing these values you can see that the volatility in prices between spot gold and the Dow were actually quite similar in 2011.   

Lets take one more look at the data.  Here is a graph showing the monthly highs and lows of gold and the Dow plotted.    Gold price is on the left axis in dollars and the Dow value is on the right axis.

Viewing it visually you can also see the similar amount of volatility between gold prices and stock prices over the 2011 year.



  1. Interesting. When I did my MBA, we had some measurement of volatility (Beta?) I can't recall how we came up with it.

    It would be very interesting to see this over several years - say 3-5 years. Stock brokers always say that gold is more volatile, was 2011 just different?

  2. Randy,

    I've heard of the 'beta' and 'alpha' measurements in finance. However I haven't taken the time to learn how they work exactly. Its a little out of my depth as an amateur. :) This was just my own fairly crude / common sense measure of the ups and downs. I would be interested to see long term measures of volatility and how they compare as well. I could probably as easily do the same kind of comparison over a longer term to get a decent idea of how much the assets swing up and down in a typical period.


  3. Fascinating. I wouldn't have guessed that the volatility would have been the same. I suppose that is why emotions and feelings shouldn't play a role in our investing decisions.


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