Seasonality, the tendency for prices to consistently move in the same direction at particular times in the calendar year, is always fascinating. While it is intuitive for commodities dominated by orbital-mechanics-driven annual patterns, such as natural-gas demand surging in the cold winters, seasonality also exists in commodities without clear calendar connections.
Over the years I’ve done a lot of work on gold seasonality. Though this metal is mined year round regardless of the seasons, it still exhibits strong seasonality. This is driven by large fluctuations in investment demand tied to the calendar, including festival seasons in Asia, Christmas season in the West, and financial-year-end cash-surplus buying. The calendar year really matters for gold.
Each time I penned a new essay on gold seasonality, I received many e-mails wondering “what about silver?” I’ve been curious too, but my technical research showing silver following gold is crystal clear. Gold’s action drives psychology in the entire precious-metals realm, so silver traders buy silver when gold is strong and sell silver when gold is weak. Silver’s primary driver is gold.
Across all trading days since silver’s secular bull was stealthily born in November 2001, it has had a correlation r-square with gold of 89%. Statistically at least, 89% of silver’s day-to-day price action throughout its entire bull is directly explainable by gold’s own! If you want to trade silver successfully, there is simply no arguing with the fact that you have to watch gold for cues on buy and sell timing.
Since silver so closely follows gold, shouldn’t silver seasonality mirror gold’s own? I’ve been wanting to test this assumption for some time, but with all the chaos in the financial markets over the last couple of years it got sent to the backburner. But this week as I pondered gold’s seasonally-bullish time of the year we are entering, I started to wonder about silver again.
Conventional futures-based seasonal analysis examines super-long periods of time often running 30+ years. But such long spans encompass bulls and bears alike, and prices behave very differently in bulls and bears. I’m more interested in how silver has behaved seasonally in this secular bull, which can aid our current trading. So this essay’s silver bull seasonal analysis begins in 2000.
These seasonality explorations are not trivial undertakings. The spreadsheet underlying the charts in this essay has over 7k formulas, divided among nearly 140 specific…
