Commodity Trader's Almanac 2O11

28

SILVER TARNISHES

IN FEBRUARY

Over the years silver has peaked in February, most

notably so in 1980 when the Hunt Brothers’ plot

to corner the silver market was foiled. Our sea-

sonal study shows that selling on or about

February 17 and holding until about April 25 has

worked 29 times in the last 38 years, for a win

probability of 76.3%. As you can see in the short

silver table, the usual February silver break was

trumped by the overarching precious metal bull

market of 2002–2010 only twice in the last eight

years.

Last year this trade did not fare so well due to

the decline in the euro currency. Precious metals

markets defied gravity, as investors were seeking

a safe haven to avoid monetary losses in equities

and foreign currencies.

Silver is considered the “poor man’s” gold,

and it does in fact tend to mirror the price move

of gold. It is an industrial metal, so in periods of

declining economic conditions silver can remain

weak. However, it does have a demand base for

jewelry, and it is also used in the electronics

industry because of its high electrical conductiv-

ity and its extreme resistance to corrosion. It is

still used in some photo processing applications,

but demand in this area has declined with the rise

of the digital age of computer imaging.

The chart below of silver has the closing

price of ASA Limited (ASA), a mining company

that produces silver, overlaid on top. The bottom

line is the av ...