I would estimate that I’ve spent less than an hour thinking about silver in my career, and most of it was preparing to write this.

I had heard that silver was on a tear, as was gold, but even more so. I only looked at the last year, but the chart below shows that since early February 2025, ignoring Friday, gold has nearly doubled, and Silver was up 3.5x.

The gold narrative was centered around central banks rebuying gold instead of Treasurys, worries about the US dollar, lower real interest rates, fiscal concerns, geopolitical risks, and frustration with cryptocurrencies like Bitcoin.

I assume that silver is smaller and less liquid, which could explain why it pumped higher around Thanksgiving, but I don’t really know. What’s interesting to me is that silver lost -26.4 percent in one day and is still up 2.5x in a year.

A few lessons emerge.

First, our old friend diversification. Even after a spectacularly bad day for silver, a diversified portfolio with only a small allocation would not have been meaningfully impaired. I looked at a handful of commodity funds—already a narrowly diversified slice of the market—and they were mostly down between one and five percent.

Second, statistics can lull us into a false sense of precision. I looked at trailing volatility over the past year and asked ChatGPT how often one should expect a day that bad—an approximately eleven-standard-deviation event. The answer: longer than the universe has existed.

That’s probably wrong. Not because the math was necessarily incorrect, but because the inputs and assumptions were (although it could have been a hallucination too). A year of daily observations is insufficient to estimate tail risk, and a normal distribution is plainly the wrong model for commodity returns. Markets, especially leveraged ones, live in the tails.

Traders using leverage must obsess over this kind of risk. We do not.

More broadly, this episode is a textbook example of what academics call a momentum crash.

Momentum is the idea—observed repeatedly in markets—that assets rising in price tend to continue rising, and assets falling in price tend to keep falling. It has been part of the academic literature since at least the early 1980s, though practitioners understood it long before that. The intuition was captured vividly in the 1923 classic Reminiscences of a Stock Operator, inspired by the career of Jesse Livermore.

A momentum crash occurs when that trend reverses abruptly. Silver’s chart illustrates it as clearly as anything could: a long stretch of unexplained positive momentum followed by a sudden, violent break.

Momentum, in general, has been a profitable factor over time. But it comes with costs—trading frictions, implementation challenges, and the need to endure occasional crashes like this one. Those crashes are not bugs; they are part of the strategy.

Which brings us back, once again, to diversification. Relying on a single asset or a single factor is unwise. Portfolios are more resilient when returns are drawn from a mix of assets and a mix of factors—precisely because no one knows which silver-like episode comes next. For now, it’s nice to just be watching from afar.