Silver Rally Due - Seasonally Strong Mid December To End of April

Today’s AM fix was USD 1,709.75, EUR 1,318.23 and GBP 1,063.41 per ounce. 
Yesterday’s AM fix was USD 1,708.50, EUR 1,324.11 and GBP 1,065.42 per ounce.

Silver is trading at $33.15/oz, €25.62/oz and £20.58/oz. Platinum is trading at $1,632.00/oz, palladium at $697.90/oz and rhodium at $1,070/oz.

Gold climbed $7.50 or 0.44% in New York yesterday and closed at $1,711.60/oz. Silver hit a high of $33.415 and finished with a gain of 0.39% at $33.19/oz.

Gold and silver are slightly lower against all fiat currencies today – although the under pressure yen was flat against gold – on what is being attributed to profit taking. There is a belief among many market participants that the Fed will announce further stimulus measures, which will boost the precious metals appeal as an inflation hedge.

The FOMC meeting begins today and the press conference and policy statement is on Wednesday. Most economists are looking for an announcement of $45 billion in monthly bond purchases and the continuation of ultra loose monetary policies that should benefit gold and silver.

Gold ETF holding’s fell from record highs to 76.177 million ounces on December 9th after a run of consecutive record highs every week since the middle of November despite counter intuitive trading and the lull in prices.

Some of the recent weak performance in the precious metals may be due to some large institutions and hedge funds engaged in yearend book balancing and that includes taking profits to cover losses in other areas.

Gold and silver are up 9.3% and 19% respectively so far this year – thereby outperforming many asset classes again in 2012.

In time, 2012 may be seen as a year of correction and consolidation for the precious metals after the sharp gains and record nominal highs seen in 2011.  

As Dimitri Speck’s excellent ‘Silver Seasonal 30 Year Chart’ shows silver over the long term has a clear seasonally strong period from mid December through to the end of April.

Silver Seasonality Chart 

Indeed, Bloomberg’s ‘Seasonality Chart’ for silver shows that in the shorter term there are also seasonal factors to consider. In the last 5 and 10 years, the best month to own silver has been February with gains of 9.5% over the 5 year period and 6.4% over the 10 year period.

The months with the next best performance are November, January and April (see 5 and 10 year average returns in chart). Over the long term March is a good month to own silver and this can be seen in the 3.2% 10 year average return.

This shows that the optimal time periods to own silver are from the end of June through to May.

June is a wicked month to own silver with hefty losses of 5.5% and 5.3% over the 5 year and 10 year period. August is a weak month and September mediocre. 

While silver has clear seasonality, one should not use it as a trading bible – it is merely a guide.

This is clearly seen in the fact that while February is silver’s best month, silver fell 5% in February 2003 which could have wiped out someone trading silver with leverage.

Silver’s seasonality is clear and can help us to decide on when to buy or add to allocations and indeed when to sell or reduce allocations. 

Silver in USD (5 Year) – 100, 200 and 250 Daily Moving Average 

The positive seasonals and silver being close to its long term daily moving averages after the massive period of consolidation of the last 21 months means that the short term cyclical and technical prospects for silver look very positive.

Silver Prices/Fixes/Rates/Vols