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Gold and Silver taught us the same lesson over 50 years: Big rallies are often followed by long stretches of pain. Focus on asset allocation, not short-term euphoria
Below are some of the most striking drawdowns in dollar terms (1975–2025) - where recoveries took anywhere from months to decades.
For instance, gold's 1980 peak wasn't regained until 2008 (~28 years), and silver's 1980 spike took until 2025 (~45 years) to cross its old nominal high.
Do not let a euphoric bull market make you overweight a single metal - drawdowns can be deep and long.
The Allure of the Shiniest Objects (and the Reality Check)
Gold and Silver have witnessed some spectacular bull runs. But beneath the gleam, these metals have also taught us hard lessons about patience, volatility, and the true meaning of "long-term". Let's look at some drawdowns (1975-2025) – periods where recovery wasn't just months, but often decades.
Major Gold Drawdowns (in Dollar Terms, 1975-2025)
- Gold - 1980 peak → long bear
- Peak: Jan 1980 ≈ $850 / troy ounce
- Low: late-1999 ≈ $252 / troy ounce
- Drawdown: ≈ 70% from peak to low.
- Recovered to previous high: Jan 2008.
- Time taken to recover: ∼28 years (1980 → 2008).
- Gold - 2011 peak → mid-2010s low
- Peak: Aug–Sep 2011 ≈ $1,900 / troy ounce.
- Low: Dec 2015 ≈ $1,046 / troy ounce.
- Drawdown: ≈ 45% from peak to low.
- Recovered to previous high: Mid-2020 (gold surpassed the 2011 highs around July 2020).
- Time taken to recover: ∼9 years (2011 → 2020).
Major Silver Drawdowns (in Dollar Terms, 1975–2025)
- Silver - 1980 spike → multi-decade recovery
- Peak: Jan 1980 ≈ $48–$49 / troy ounce.
- Low: 1990s (single-digit $/ troy ounce levels; low points around $3–$5 / oz in the 1990s).
- Drawdown: ∼90%+ from the 1980 spike to 1990s lows (approximate).
- Recovered to previous high: 2025 (silver crossed the nominal 1980 record in 2025).
- Time taken to recover: ∼45 years (1980 → 2025).
- Silver — 2011 peak → mid-2010s low
- Peak: Apr 2011 ≈ $48 / oz (a large rally alongside gold).
- Low: Dec 2015 ≈ $13–$14 / oz.
- Drawdown: ≈ 72%.
- Recovered to previous high: 2025 (only in 2025 did silver reclaim/clear past 2011 highs).
- Time taken to recover: ∼14 years (2011 → 2025).
Every major market rally, every euphoric phase, seems to whisper the same four deceptive words: "this time it's different." Yet with startling regularity, history proves it rarely is. Gold and silver have seen their share of emotional, speculative highs, and each has been followed by long, taxing drawdowns. Market conditions evolve, but human emotions – greed, fear, impatience – remain remarkably consistent.
The unseen Force: Local Currency Impact
Most Indians would not know that much of the return from gold and silver over the decades came not just from global price gains, but from the rupee's depreciation against the dollar. If the rupee appreciates in the future, it could offset or even negate the gains in rupee terms, in short, the tailwind can turn into a headwind an important point to remember.
The Indispensable Shield: Asset Allocation
The stories of gold and silver are not meant to deter you from these assets, but rather to underscore a fundamental truth of investing: Diversification and thoughtful asset allocation are your best defenses against market whims and emotional decisions.
A well-constructed portfolio doesn't bet everything on one shining story, no matter how compelling it seems in a bull market. It thoughtfully allocates across:
- Equities: For growth potential.
- Bonds: For stability and income.
- Cash: For liquidity and opportunity.
- Real Estate: For tangible assets and potential appreciation.
- Alternatives: Including a modest and appropriate allocation to assets like gold and silver,not as a primary growth engine, but as a hedge against inflation and market uncertainty.
Key Takeaway for your Portfolio:
- Drawdowns vary wildly: some are short (months–years), otherslast decades(silver 1980→2025; gold 1980→2008).
- Recovery time ≠ drawdown depth: very large % losses can take much longer to recover (silver's 1980 spike vs. 1990s lows is the starkest example).
- Emotions are Expensive: Euphoria often leads to concentrated, risky positions right before major downturns. Act on a plan, not on impulse.
- Build an All-Weather Portfolio: The goal isn't to perfectly time the market or pick the next big winner. It's to build a resilient portfolio that can weather all economic cycles and help you achieve your long-term financial goals.
The smart investor never bets everything on one shining story. They understand the wisdom of balance and the enduring power of asset allocation – a strategy that truly shines when the market's glitter fades.
Note: The January 1980 silver peak near $49/oz was a brief speculative spike driven by the Hunt brothers' attempt to corner the market. Prices collapsed within weeks (US government & exchanges intervened), making it one of the sharpest short-lived highs in commodity history.