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What Commodity Influences Silver's Price 92% of the Time?
Pinnacle Digest writes: In Adam Hamilton’s latest report he explains the seasonal factors behind silver and where its price is headed. Despite the fact that silver is mined year round, its price is influenced almost solely from demand levels, as opposed to supply levels like many agriculture commodities. “And silver is just entering its strongest time of the year, which is very bullish for it and its miners’ stocks.” stated Hamilton.
Contrary to what many may think, Hamilton explains that silver price action is mainly driven by gold prices. He states “Investors and speculators are only likely to plow capital into silver and drive up its price rapidly when gold is thriving. Gold strength naturally stokes greed for the highly-speculative white metal. And later when gold corrects, traders are quick to abandon silver in sympathy.”
If you think about some of silver’s greatest moves up in recent years, it has been on the back of record gold prices (or close to). Investors will buy into silver as gold rises, but the hysteria buying for silver comes shortly after gold closes in on an annual high. When gold is believed to be getting a little ‘top heavy’ investors look to its kid brother, silver, for gains.
“From silver’s humble beginnings over a decade ago to this week, the daily close in silver has had a 92% correlation r-square with the daily close in gold” stated Hamilton. He goes on to state “This means that 92% of silver’s price action in its entire secular bull is statistically explainable by gold’s own. 92%! So why does silver exhibit such strong seasonality? Simply because gold does. Silver follows and amplifies moves in gold, both up and down.”
Since 2001 silver has gone from $4 to a high of nearly $50. From the beginning of this bull rally, silver has increased by as much as 1105%! And it’s all because of gold’s price increase (or at least 92% of the reason why).
Remarkably, over the last 12 years silver has increased, on average, 22% by December in comparison to where it started the year. And as Hamilton explains, when you compare that to how relatively flat the stock market has been during that same 12 year period, those returns are remarkable. Interestingly enough, Jeff Clark recently published a similar statistic article based on gold’s last 12 year performance. Click here to take a look at gold’s 12 year performance.
Hamilton has identified, over his many years of complex precious metal analyses, that there are times of the year which have consistently proven to be great for buying silver. As he states “There are times of the year where the odds of buying relatively low are pretty high. These are great times to add new positions, as long as other technical and sentiment indicators don’t suggest silver happens to be overbought.”
He has also identified consistent times of the year where the likelihood of buying on an annual high are quite probable.
Click here to read Adam Hamilton’s in-depth article on timing the silver market.