Silver's Weakest Month is Here: Time to Buy?

June has begun and the weather is turning warmer — those involved in the resource markets know that means the summer doldrums, when traders typically spend less time at their desks, are here. However, what investors may not be aware of is that June is historically silver’s weakest month.  

Looking at a seasonal chart for silver, Clive Maund of The Market Oracle notes that after falling in June, silver tends to begin heading upward in July, and particularly September, when investors return to trading. On that basis, he believes that any weakness in the next few days, and even up to three weeks into the future, “should be seized on as presenting a major buying opportunity.”

Where is the price? 

Since crashing, along with gold, in mid-April, silver has had little luck coming anywhere near the price tag of over $27 that it commanded prior to its fall. Indeed, Bill Downey, writing for ETF Daily News, said in an article published yesterday that silver has done nothing since that time “other than go sideways in a choppy, sloppy, sideways bearish looking pattern.” He believes that the one good thing that can be said about the situation is that it “is so ugly and bearish looking on the short term charts and the sentiment is so gloomy that perhaps we are near a bottom.”

That idea was also raised last week by Money Morning, which notes in an article that “the last time the number of silver shorts were at the current level for more than a week or two was July 2012,” according to MarketWatch’s Tom Essaye and Jim Woods. Encouragingly for today’s investors, within two months of that time, silver had risen 30 percent.

The article also notes that Peter Krauth, global resources specialist at Money Morning, has pointed out that the gold/silver ratio is currently at 62, which is high. That bodes well for silver prices, he believes. “It hasn’t been at these levels since late 2010, when silver started shooting higher from about $17 to peak around $48 in April 2011. It could still go higher, but it should cave to pressure and head downwards over time. That should mean higher relative silver prices,” he commented.

For his part, Maund of course believes there is “plenty” of current evidence that indicates that the white metal “is setting up for a powerful rally.”

The metal closed Tuesday in New York at $21.68 per ounce.

To buy or not to buy?

While investors might be deterred from buying on the basis that it’s better to “sell in May and go away,” not everyone believes that old adage holds much clout.

For instance, this time last year, Frank Holmes, CEO and chief investment officer at US Global Investors, as well as Eamonn Fingleton, former editor of Forbes and the Financial Times, questioned “the wisdom of taking a long summer break,” with Fingleton commenting that he has “never actually done so.”

It’s up to investors to determine whether these factors are a recipe for success for silver.

 

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Related reading: 

Sell in May and Go Away: A Grain of Truth

Is “Don’t Sell in May” the New Way to Go?