The Fundamentals behind Gold Price Seasonality

Seasonality of gold and silver

In the Six Major Fundamental Factors that Determine Gold and Silver Prices we have learned that prices of gold and silver  represent the growth difference between Europe and the Emerging Markets on one side and the United States on the other. When the former two are weak, then gold prices tend to fall. When the U.S. economy is weak, however, then gold prices tend to rise.

While the BEA adjusts GDP growth for seasonal effects, commodity prices are not seasonally adjusted.

 

This leads to the question:
When is the best point during the year to buy gold and silver?

 

The first short answer without further fundamental reasoning is: 

Gold and silver prices tend to be low at the beginning of the year and higher from September to November, while having a summer trough in June/July.

 

 

 

 

 

Gold and silver prices are low in January and July and rise at the end of and rise at the end of the year

Gold and Silver Seasonality

click to enlarge

 

 

 

 

 

Fundamentals behind the gold price seasonality

Our follow-up question, is : Why that? Can I trust these seasonal tendencies?
Are there fundamentals behind it that can give a reasoning?

  • The fourth quarter is traditionally a strong period for the United States, mostly driven by retail sales at Christmas and Black Friday shopping.
  • In the first quarter of the year the number of jobs in the United States, strongly declines (see graph).

In Europe one can observe similar tendencies, but – thanks to the European social safety net and milder winters – to a far lower extend.

In the Emerging Markets completely different seasonalities can be observed: Think about the Chinese New Year in January/February or temperatures in India and Indonesia that differ completely from the U.S.

 

 

Seasonality in U.S. Jobs

Europeans Save more in Q2 and Spend more in Q3

As Eurostat unadjusted data shows: Europeans typically save more in Q2 and Q4, but spend more during the holiday season in the third quarter.

American economic data that can show seasonal variations like the Non-Farm Payrolls above, are often not published. Unadjusted data for the GSAVE time series  in the FRED database is provided only once year.

Eurozone Household Savings Rate Not Adjusted

Oil Prices Rise from February to April and Fall in Winter

 

As the graphs show, oil (but also silver prices) tend to increase in the month of February to April. But rising oil prices are negative for U.S. growth. Oil and gasoline prices are the typical culprits for the Sell in May effect.

 

 

Oil Price Seasonality 

Price changes per month spot, future and OIL

Oil Price Seasonality, click to enlarge

Gasoline Prices Increase from February to August and Fall in Winter

By August/September, however, Europeans begin to spend more and lower their savings rate. The European growth rate may often outpace U.S. growth during this period. Due to higher taxes on fuel, the European economies are less harmed by high fuel prices.

Thanks to shale oil this seasonal oil and fuel price tendencies are not so strong anymore. As the graph, 5 year seasonal data exhibits less variations than the 10 or 15 years.

 

5 10 15 Year Seasonal Study Gasoline

Weakness and strength points for gold

The following  5 year to 30 year seasonal studies show weakness points of gold:

  • Mid March
  • Mid June
  • to lower extend Mid October

Strength points are:

  • The February 19
  • Early June
  • Mid September
  • Mid November as the best point in the year.

 

The graphs are not adjusted for inflation. So one component of the rising gold and silver in between one year, is the rising inflation.

 

5 year seasonal study Gold

Many know that gold is very volatile in the course of year. Gold prices tend to be low in January and rise between July and November. But what are the fundamental reasons behind this seasonality? - Click to enlarge

10 year Gold Seasonality

click to enlarge, source David Stendahl

10 year seasonal study Gold

Many know that gold is very volatile in the course of year. Gold prices tend to be low in January and rise between July and November. But what are the fundamental reasons behind this seasonality? - Click to enlarge

20 year Gold Seasonality,

click to enlarge, source David Stendahl

20/30 year seasonal study gold

Many know that gold is very volatile in the course of year. Gold prices tend to be low in January and rise between July and November. But what are the fundamental reasons behind this seasonality? - Click to enlarge

George Dorgan
George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on SeekingAlpha.com and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.
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