Its time to pay close attention to silver

NOTE: The original version of this article contained an error in the first table below. For the years of 2025 through 2028, the months of June and July were deemed favorable for silver. The correct months are July and August. The table below reflects this correction. I apologize for any confusion.

Key Points

• Silver was stuck in a trading range for roughly a decade before attempting to breakout to the upside in 2024
• After a nice run into October, silver has pulled back roughly 27%
• Several long-term cycles suggest the potential for a breakthrough in 2025 and for a meaningful run to the upside in the years ahead

Revisiting two articles from 2023

In December 2023, I posted two articles regarding the long-term outlook for silver based on a combination of several long-term cycles. Rather than recreate the wheel, I will ask you to revisit the two articles linked below and then I will bring them up-to-date for this month and into 2025.

It's time to keep an eye on silver (and to be patient) - Part I

It's time to keep an eye on silver (and be patient) - Part II

A review of three cycles

The articles culminated in a simple model based on the three cycles summarized below.

We highlighted three distinct cycles that may apply to silver in Part I. For full details, see here. For now, a recap:

• Six favorable months of the year for silver: Six months are deemed favorable, and the rest unfavorable
• The 8-year cycle: The first four years of each cycle are deemed favorable, the second four years unfavorable
• The 30-year cycle for commodities: The first 15 years of the cycle are considered favorable for commodities in general

Putting the cycles together

The model reading is arrived at by adding the values for Variables A, B, and C. Let's examine each cycle's current status and the JK Seasonal Silver Model's current position.

Months of the Year: November, December of 2024, January, and February 2025 are all deemed favorable.

Variable A = +4 (and will remain +4 through the end of February 2025)

Eight-Year Cycle: A new favorable four-year cycle will begin on 2025-01-01. So, until then:

Variable B = 0

From 2025-01-01 through 2028-12-31 Variable B = +2

30-year cycle for commodities: This cycle turned favorable on 2023-06-30 and will remain favorable until 2038-06-30:

Variable C = +1

When we add up the variable values, we find:

For Dec 2024 JK Seasonal Silver Model = Variable A + Variable B + Variable C = 4 + 0 + 1 >>>> = +5

For Jan-Feb 2025 JK Seasonal Silver Model = Variable A + Variable B + Variable C = 4 + 2 + 1 >>>> = +7

The tables below display the Model readings for 2024 through 2032.

The table below replaces any Model reading of +5 or higher with the word "Silver." All other months display the word "Cash." According to the Model, traders looking to play the short side of silver should stick to doing so during the months labeled "Cash."

Remember:

• Readings of +5 or more are deemed "favorable" for silver
• Readings of +4 or less are deemed "unfavorable" for silver

This suggests that traders look to play the long side of Silver during January-February, July-August, and November 2025 through February 2026.

The chart below displays JK Silver Model readings from 1953 through 2040.

A word of caution

While historical back-tested results are pretty favorable for silver, the model is not necessarily intended to be used mechanically. Traders might also consider trend-confirming indicators before taking a bullish position on silver. 

Other things to consider are which trading vehicle to use, how much capital to allocate, and how much capital to risk before cutting a loss. The most straightforward approach is to trade silver futures. However, futures trading involves a significant amount of leverage and unlimited risk. Non-futures traders can consider the iShares Silver Trust (ticker SLV) and/or options on ticker SLV as a lower-cost and lower-risk alternative.

The "word of caution" is this: Note that for 2024, January, February, July, August, and November (and now December) were deemed "favorable" for silver. Each of the first five months just listed witnessed a decline for ticker SLV, with a cumulative decline of -11.6%. Not exactly inspiring results. Still - for reference - the chart below displays the hypothetical growth of $1 in ticker SLV only during months when our model was at +5 or higher since SLV started trading in 2006.

The chart below displays the same data in logarithmic format. While disappointing, 2024's poor performance does not appear to be an earth-shattering event in this context. 

Will the recent downtrend reverse this month? Or next year? There are no guarantees, but that is the potential play at hand for speculative traders.

For reference, the chart below displays the growth of $1 in ticker SLV only during months when our model was at +4 or lower since SLV started trading in 2006.

The chart below displays the same data in a logarithmic format.

What the research tells us…

For aggressive traders looking to play the long side of silver (and/or for those who want to gain some exposure to the silver market), the information presented here suggests that the time to do so may be at hand. As always, there are no guarantees (especially when relying primarily on seasonal and cyclical factors). So, intelligent capital allocation and risk management remain paramount - and are the primary responsibilities of each trader.