Are you invested in or looking to buy into the silver market? Back in April
we wrote an article illustrating the seasonal trends for the price of silver.
At that time we determined that it may make sense to wait for a more favorable
time of year to buy new positions. Based on silver performance in past years,
would it have made sense to buy in July / August, or would it have made sense
to wait for a better buying opportunity? Let's take a look at some purchases
in the bull market at the start of each August to see what would happen to
that investment by spring.
In 2004 we can see that if we had purchased silver in August we would have
had a little bit of buying opportunities in the coming months but not much.
Silver more or less trades sideways to slightly up that year but July / August
was a reasonable time of year to add to positions. So how about the other
years?
In 2005 we can see that July / August was a fantastic time to add to new positions.
A strong uptrend followed the typically slow summer months.
In 2006 a slightly better buying opportunity presented itself in September
/ October which can typically be another weak time of year for the price of
silver. However, July / August proved to be a reasonably good time to add
to positions in 2006.
In 2007 the price of silver trended much higher from summer to spring with
the exception of a slightly better buying opportunity around September. Again,
buying in July / August turned out to be a lower risk buying opportunity.
Clearly buying silver in July / August of 2008 was not a good idea. It made
a lot more sense to wait to purchase the metal at a considerably lower price
in October.
Now buying new silver positions in July / August of 2009 & 2010 was a
fantastic time to buy silver. In fact, waiting to buy new positions in October
could have resulted in missing this impressive uptrend.
In the strong downtrend of 2011, following the strong advance in 2010, August
2011 proved not to be a great time for buying silver.
From a short term perspective it would have been a very bad idea to buy silver
in October of 2012.
The following is the simplest way we can summarize our thoughts on the above
charts. When it comes to seasonal trends for the price of silver in the current
bull market the following applies:
1) Summer is a great time to add to position as it is often at or near the
low for the year.
2) When taking new positions in summer one must realize that even lower prices
often present themselves in fall.
3) After a strong year with a large increase in the price of silver it is
possible that prices do not shoot higher and can actually fall further heading
into spring.
4) It is important to consider the market from many perspectives prior to
buying but seasonal trends are a very helpful tool to consider.
What is interesting from the above analysis is just how well an investor could
have done from 2004 to 2012 just from buying at the start of August and selling
at the end of April. This is a rather simplistic trading strategy that could
have made an investor, excluding fees and taxes, approximately a 31% compounded
rate of return.
Good luck!
At www.investmentscore.com we
use our proprietary technical indicators and consider seasonal trends to give
us an idea of when to scale in and scale out of new positions. If you would
like to learn about our strategy and sign up for our free or paid newsletter
please visit www.investmentscore.com.
