Silver spot prices on the New York Mercantile Exchange gained only 0.71% this month, while gold prices jumped 2.74%. Silver likely will continue to underperform for a few weeks because increased risk aversion has boosted safe-haven buying of gold.

During the early part of an economic slowdown, investors prefer gold to silver. However, silver is a smaller market, and when the white metal moves it tends to move faster than the yellow metal, overtaking gold on a percentage basis. Smart investors with lower risk aversion can often profit from silver's sharp moves.

For years, traders have been placing too much emphasis on the silver-to-gold ratio. Many use this ratio to value silver, and some have profited by trading between the two metals. However, the correct ratio is still unknown.

The ratio increased from around 40 in 1984 during the Reagan era to around 100 during the economic slowdown of 1991. Silver's volatile nature makes it a perfect choice during a bull run for precious metals. In recent years, the ratio crossed 90 following the bankruptcy of Lehman Brothers, and it is currently at around 65.

In the current month, silver spot prices on the New York Mercantile Exchange showed a volatility of 2.55%, vs. gold's 1.24%. Meanwhile, the silver exchange-traded fund, iShares Silver Trust ( SLV) showed a volatility of 2.57% this month, in comparison with the gold ETF, SPDR Gold Trust ( GLD), which had volatility of 1.25%.

Stock Volatility

Silver stocks have higher volatility compared with that of gold stocks. You can observe this in the 52-week highs and 52-week lows of these stocks. Kinross Gold's ( KGC) 52-week high is about 48% higher than its 52-week low. New Gold's ( NGD) 52-week high is 224% higher than its 52-week low.

For major gold producers Barrick Gold ( ABX), Goldcorp ( GG), and Newmont Mining ( NEM), this percentage is 57%, 49% and 62%, respectively.

However, for silver producers, this percentage varies widely, from 60% for Silver Standard Resources ( SSRI) to 231% for Hecla Mining ( HL).

This percentage is 203% for Silver Wheaton ( SLW), which has a market cap of $7.0 billion, and 67% for Randgold Resources ( GOLD), which has a market cap of $7.9 billion.

The volatility of silver producers has been more prominent during the financial crisis. For instance, during 2008 Hecla Mining dropped from nearly $13.0 a share to as low as $1.30. We anticipate the volatility of silver stocks to remain higher in the coming years.