zealllc.com / Adam Hamilton / August 4, 2017
The gold miners’ stocks have suffered a lackluster year so far, mostly lagging gold’s solid new upleg. But that vexing underperformance should soon give way to a big catch-up surge. The deeply-out-of-favor gold stocks are now entering their strong season, which starts right about now with a powerful autumn rally. That generates major gains on average in bull-market years, and this year’s upside potential is exceptional.
Seasonality is the tendency for prices to exhibit recurring patterns at certain times during the calendar year. While seasonality doesn’t drive price action, it quantifies annually-repeating behavior driven by sentiment, technicals, and fundamentals. We humans are creatures of habit and herd, which naturally colors our trading decisions. The calendar year’s passage affects the timing and intensity of buying and selling.
Gold stocks exhibit strong seasonality because their price action mirrors that of their dominant primary driver, gold. Gold’s seasonality isn’t driven by supply fluctuations like grown commodities experience, as its mined supply remains fairly steady year-round. Instead gold’s major seasonality is demand-driven, with global investment demand varying dramatically depending on the time within the calendar year.