It’s easy to dismiss seasonality in the price of a tradable asset. After all, if supply and demand fluctuate regularly you’d think the resulting arbitrage would attract enough traders to smooth out prices.
But that’s apparently not the case with gold and silver. Here’s an analysis from Casey Research on the subject with a couple of highly revealing charts.
Many investors, especially those new to precious metals, don’t know that gold is seasonal. For a variety of reasons, notably including the wedding season in India, the price of gold fluctuates in fairly consistent ways over the course of the year.
This pattern is borne out by decades of data, and hence has obvious implications for gold investors.
Can you guess which is the best month for buying gold?
When I first entertained this question, I guessed June, thinking it would be a summer month when the price would be at its weakest. Finding I was wrong, I immediately guessed July. Wrong again, I was sure it would be August. Nope.
Cutting to the chase, here are gold’s average monthly gain and loss figures, based on almost 40 years of data:
Since 1975—the first year gold ownership in the US was made legal again—March has been, on average, the worst-performing month for gold.
This, of course, makes March the best month for buying gold.
Here’s what buying in March has meant to past investors. We measured how well gold performed by December in each period if you bought during the weak month of March.
What does this pattern means for us here at the end of April? Most likely a couple of boring months are in store, in which both upside potential and downside risk are modest. This in turn means that decisions (to stack, take profits, or add to mining share portfolios) can be considered instead of rushed, with good-until-canceled orders being allowed to sit until, in the summer doldrums, some bored trader comes along to make you a good deal.
COTs remain bad for gold, good for silver
Meanwhile the structure of the gold futures market got a little less screamingly bad, with both speculators and commercials moving back in the direction of balance.
They’re still a long way from what would normally be thought of as a bullish posture, however. Speculators are too long and commercials are extremely short, which traditionally precedes a drop in price. Maybe “sell in May and go away” will turn out to apply for gold this time.
Silver speculators closed out a lot of shorts last week, but are still closer to net short than is usual. That’s bullish, just less so than in the past couple of weeks.
In other words, nothing huge to report, just as you’d expect as precious metals enter their slow season.