Silver: Measuring Noise vs Fundamentals as Guide for Investing

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Table 1


Chart 1

If we are able to measure and differentiate Noise from Fundamentals, it can be useful for investing . Using the spot price of Silver as a case study, we use Wavelets to measure what portion of the price movements (whether up or down ) is due to Noise (N ) and what portion is due to Fundamentals( F). We define Noise as Speculative Activity and its Residual (remainder) as Fundamentals. 
 
About Wavelets 
Wavelets are a powerful mathematical tool for cleaning noisy time-series data, such as stock prices or medical heart rates, because they can simultaneously identify when an event happened and what its frequency was. Unlike traditional statistical measures like the Fourier Transform—which views data as an endless series of smooth waves—wavelets use "mini waves" that start and stop quickly. This unique "multi-resolution" capability allows them to surgically remove high-frequency random noise while preserving sharp, abrupt changes in the data, such as a sudden market crash or a brief heart arrhythmia, which other methods might accidentally smooth away as "noise".
Interesting Facts for the Layman:
Art Detective Work: Because wavelets are so sensitive to fine details, experts have used them to analyze the brushstrokes of paintings and successfully distinguish original Vincent van Gogh masterpieces from clever forgeries.
The "FBI" Connection: The FBI uses wavelet technology for its massive digital fingerprint database; the method is so efficient at compressing data without losing detail that it allows them to store millions of fingerprints while keeping the crucial ridges and swirls perfectly sharp for matching.

Summary of Findings from Table 1 and Chart 1
  • The total price rise (USD) in the 1-year period covered by the data is 62.32 out of which 58.75 or 94% is due to fundamentals and the remainder (6%) is noise. Red line has been going down at a raid rate since October 2025. 
  • Around October 2025, Silver price began an upward trend driven almost solely by fundamentals. (See Red line) but around the beginning of December, the noise component increase as well as its intensity (almost vertical spikes)
  • But during this period, you can also see the pushback' by investors buying based on its fundamentals (see down spike in Red line in December).
  • The Yellow line shows that the noise is volatile too i.e. noise which lifts prices as well as depresses prices. 

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