Silver prices were outpacing gold’s year-to-date performance, but that changed this week — and prices could be headed lower in the next couple of months.
Year to date, as of Wednesday’s settlements, futures prices for silver
were up roughly 9.1%, compared with a larger 9.8% rise for gold
according to FactSet data based on the most-active futures contracts. On Monday, silver was up about 10.9% for the year, while gold had climbed by 9.6%.
The timing is impeccable.
“Calendar years are important to gold and silver,” Taki Tsaklanos, lead analyst at Investing Haven, told MarketWatch. “Silver tends to peak in April — the only exceptions being the raging bull market years 2009 and 2010.”
With just two trading days left in April, silver looks as if it peaked for the month at $18.514 an ounce on April 17.
“Investment and jewelry demand both from the East and the West has always been the highest … between December and April,” said Tsaklanos, and that’s what has created a “seasonal pattern” in gold and silver prices.
The outlook for silver, however, can be harder to predict because of its dual role as both a precious metal and a base metal, he said. That means it can react in an “unpredictable way.”
In silver’s case, the dominant force was base metals, said Tsaklanos. Prices for those metals were “lagging,” and then with U.S. President Donald Trump’s presidential victory, “base metals played catch up.”
Trump’s plans to boost infrastructure spending had provided a boost to metals that are used in the sector, such as copper
‘In May and June, silver tends to go sharply lower, only to recover in July, and continue its downtrend and stabilize throughout the second half of the year.’
But going forward, Tsaklanos said he believes that “it is more likely that the precious side of silver will become the more dominant trend, and that is pointing down.”
“In May and June, silver tends to go sharply lower, only to recover in July, and continue its downtrend and stabilize throughout the second half of the year,” he said.
“A real panic which is the result of politics could certainly impact gold and silver,” he said. But “given the current state of politics, we see ‘more of the same’ and investors accepted the idea of this ‘new wave of politics’” with the election of Trump and the U.K. vote to exit the European Union.
For this year, Tsaklanos predicts that silver prices will test their 2016 lows. Silver futures prices traded at just under $14 an ounce early last year.