Market timing in precious metals is detrimental to value creation

ABSTRACT

Few number of days accounts for most of the returns delivered by precious metals (gold, silver, platinum and palladium). A passive buy and hold investment strategy in precious metals outperforms market timers who miss the best 5, 10 and 50 days by 51%, 71% and 98%, respectively. Likewise, long-term performance of precious metals is largely determined by the return of few outliers (black swans). Thus, investors should reconsider trying to predict when to be in and out of the precious metals markets and support investing in precious metals ETFs.

KEYWORDS:

• Black swans
• precious metals
• gold
• outliers
• market timing

JEL CLASSIFICATION:

• G11
• G12

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Investors can gain access to precious metals by utilizing ETFs such as IAU or SGOL (gold), SLV or SLVR (silver), PPLT (platinum) and PALL (palladium).