September is the Worst Month For Silver, with an Average 2.5% Price Drop

The iShares Silver Trust ETF (NYSE:SLV) is mired in a multi-month correction, and if history is any indicator, it’s unlikely that September will offer any respite.

Historically, the SLV closes negative for the month of September approximately 60% of the time (and closes positive 40% of the time), with the average monthly drop coming in at 2.5%:

SLV seasonality chart
Chart: Investopedia

This year’s price drop could be much worse, considering silver’s huge rally through the first six months of 2016.

Following a rally of this size, and at this stage of the trend, the price is likely to retrace approximately 50% of the 2016 advance. Based on that, SLV is expected to drop to between $16.38 and $15.71 in September. While a 2.5% drop in September is typical, it will take an 8% drop for the price to reach the typical retracement area ($16.38 to $15.71). While September could see declines of well over 2.5%, ultimately, if the price falls below $16.50, it is a long-term buying opportunity. The rally into July likely was just the first wave higher, in a multiple wave uptrend, expected to take the price above $23.

Most precious metals analysts are embracing silver and gold’s price consolidation, because periodic pullbacks are a healthy part of any bull market. The question now for investors is: how far can SLV fall, and when will it begin to pick back up again?

Some analysts are predicting a 20% correction or more, with prices not recovering until early 2017 at the earliest. The bigger the price decline, the larger the opportunity will be to profit from the ensuing bounce.

SLV-2016-09-02

SLV shares were mostly flat in premarket trading today, at $17.94 per share. SLV has risen 36% year-to-date, but has pulled back about 9% from its yearly highs.

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