Friday, August 30, 2013

September Seasonal Strength Of Gold

According to Kitco News, gold's seasonal strength occurs in the month of September.

September is usually a seasonally strong period for gold due to buying ahead of a number of major gift-giving holidays around the world.

There is the autumn “wedding season” and Diwali festival in India, followed by Christmas and Hanukah in a number of nations, then the Chinese New Year in early 2014. Further, Indian farmers often look to gold when they sell their crop after the harvest.

All of this is especially significant since India and China are the two largest consumers of gold.

My analysis of the month-over-month returns of gold since January 2000 shows strong seasonal returns in September. More importantly, September returns exhibit the strongest seasonal month-over-month performance relative to other similar periods. Gold has gained by a median return of 3.5% month-over-month in September, which compares to an overall median return of 0.9%. Additionally, the next strongest monthly median return is 2.45 in November.

I would also point out that more times than not, gold prices rise versus the relative prices in August. By my calculation, gold prices have gained in 75% of the observed September periods since 2000. Similar to the median price gains, this batting average, if you will outperforms all other monthly and the total batting average. The next strongest month's (November) batting average appears measures in at 68% while the total batting average comes in at 58%.

The above analysis supports my view that gold prices will rise in the short-term. I intend to hold my gold and precious metal stock positions until the fundamentals turn decidedly negative and/or the timing models I employ point towards a sale.

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