Some Things Actually Go Up Before and During the Fall…

In recent issues of Seasonal Insights I have discussed two asset classes that tend to suffer  performance problems in most years until the autumn, namely stocks and bitcoin.

I thought you might for a change want to hear of an asset that will be in a seasonal uptrend over coming months.

 

Many things, including bitcoin, stocks and leaves tend to fall in the aptly named fall… but some things actually start to fly…

 

Such assets do of course exist, and one that has particularly good prospects at the moment is gold.

You may well have already heard that gold prices typically exhibit strength in the second half of the year.

But when exactly does gold begin to rally, and how long does its strength last?

 

A close Look at the Seasonal Trend in Gold

Take a look at the seasonal chart of gold below. Contrary to standard charts, seasonal charts illustrate the average performance of an asset price in the course of a year. In this case the prices of the past 20 years were averaged. The horizontal axis depicts the time of the year, while the vertical axis shows the average price performance.

 

Gold price in USD per ounce, seasonal trend over the past 20 years.  Gold begins to rise in early July Source: Seasonax

 

The seasonally strong period is highlighted in dark blue on the chart. It begins on July 6 and ends on February 24 of the following year.

The average gain of the gold price in the seasonally positive time period amounted to 8.62 percent, or 13.90 percent annualized.

In the rest of the year the gold price on average tended to generate a loss.

In short, the strong seasonal period is beginning right now!

 

Think About Christmas in Midsummer

Even though you are probably not thinking about Christmas in the sweltering heat of the summer months: the festive season is the reason why the seasonal rally in gold tends to begin now.

Gold is after all not only an investment asset and an industrial metal. An estimated two thirds of annual gold production is used in jewelry fabrication. Gold demand for jewelry making thus has a noticeable effect on prices.

There are numerous international festivities that begin to affect gold prices already now.

These include Christmas, the Chinese New Year and the Indian wedding season in the autumn. On occasion of these festivities, gold is often given as a gift.

Since jewelry makers naturally replenish their inventories several months ahead of these revelries, the seasonal rally in the gold price begins already in early July.

 

This image should make it a bit easier to imagine Christmas in the summer… sunshine, birds and early birds…

 

The Gold Price Rose in 15 of 20 Cases

The seasonally strong time period between July 6 and February 14 resulted in a positive return for the gold price in 15 of 20 cases.

In the 15 years in which a profit was generated, the average gain in this time period amounted to 14.33 percent, while the average loss in the 5 losing years was 6.86 percent.

The bar chart below shows the gold price return in the strong seasonal phase for every year since 1997. Green bars indicate gains, red bars indicate losses.

 

Gold in USD, percentage return between July 6 and February 24, in every year since 1997

 

Winning years are dominant

 

A particularly large gain of 43.56 percent was recorded in 2007. The largest loss was significantly smaller. It occurred in 2014 and amounted to 9.10 percent.

The upcoming strong seasonal period therefore not only tended to generate an above average number of large gains, but fewer and far less pronounced declines.

 

What is the Score with Silver?

You may not be aware of the fact that although the prices of gold and silver usually exhibit a strong positive correlation, the seasonal pattern of silver displays significant differences. That is due to the fact that silver has a much larger industrial demand component. Its seasonal trend therefore differs from that of gold, and incidentally, it looks actually quite similar to that of platinum and palladium.

In order to take a look at the seasonal trends of the other precious metals, visit www.seasonalcharts.com, or call up Seasonax on your Bloomberg Professional Terminal by typing in “APPS SEASON”, or access it through the App Studio in the menu of Thomson-Reuters Eikon.

Take advantage of the seasonal trends in precious metals!

 

Charts by: Seasonax

 

Image captions by PT

 

Dimitri Speck specializes in pattern recognition and trading systems development. He founded Seasonax, the company which created the Seasonax app for Bloomberg and Thomson-Reuters systems. He also publishes the website www.SeasonalCharts.com, which features selected seasonal charts for interested investors free of charge. In his book The Gold Cartel (published by Palgrave Macmillan), Dimitri provides a unique perspective on the history of gold price manipulation, government intervention in markets and the vast credit excesses of recent decades. His ground-breaking work on intraday patterns in gold prices was inter alia used by financial supervisors to gather evidence on the manipulation of the  old gold and silver fix in London. His commodities trading strategy Stay-C won awards all over Europe and was the best-performing quantitative commodities fund ever listed on a German exchange. For detailed information on the Seasonax app click here.

 

 
 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

One Response to “The Golden Age Has Just Begun”

  • Hans:

    Seminal reading, Mr Speck! I kindly appreciate your
    series on seasonal trends, which are a very important
    tool for the investors.

    Bookmarked and archived. Thank you!

Your comment:

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