Octa – Gold seasonality trends: best months for investing

KUALA LUMPUR, MALAYSIA – Media OutReach – October 13, 2023 – Like flowering in spring and harvest in late summer, gold exhibits recurring seasonal patterns or seasonal trends in its market performance. Let’s look at how seasonality and cyclicality affect gold prices.

Gold’s next seasonal phase is positive

A recurring pattern suggests an intense seasonal period for gold from the end of the year, beginning in mid-December and continuing until around the second half of February. This is supported by research conducted by Seasonax, which analyzed 54 years of data.

According to the data, the intermediate seasonal minimum generally occurred between December 15 and 20, and the median seasonal maximum occurred in late February. There have been years without any rises, but overall, gold has been up for 14 years out of the last 20 years in the same two and a half months, which equates to a 70% probability of an increase in prices during this period. Average gains over this period have ranged between 8.5% and 18%, and losses have been significantly lower, from –1.6% to –3.3%, making it profitable every year since 2013. The factor Cultural and investor sentiment supports gold’s upward trend in the reported period as well.

Cultural factors increase the demand for jewelry during specific periods

Indian traditions require gold and gold jewelry to be part of the dowry. Around 10 million weddings are celebrated each year in India, and the wedding season generally runs from October to March, when temperatures are more pleasant and religious festivals take place on weekends. This is why, year after year, the jewelry industry meets almost all of its annual gold plan in a reasonably short time.

“According to the second quarter 2023 gold demand trends released by the World Gold Council, India was the world’s largest gold consumer in 2022, purchasing 601 tonnes of gold, accounting for 28% of global jewelry consumption, with China slightly behind at 598 tonnes. » said Kar Yong Ang.

The demand situation for gold jewelry in China is similar.

Investors keen to buy gold after US FOMC meeting in December

According to the Commitments of Traders (COT) bulletins released ahead of the December meeting of the US FOMC, most investors were pessimistic towards gold, with 87% of futures traders taking neutral or bearish positions. As a reminder, the intermediate seasonal low occurred between December 15 and 20, corresponding to the date of the last FOMC meeting of the year.

Gold ETF flows are another component that fits nicely with those already mentioned.

So, according to the World Gold Council, in 11 out of 15 cases, the position of funds increased in the first quarter of the last 15 years: funds bought gold in January, February and March.

The seasonal nature of the evolution of gold prices is justified in 75 to 80% of cases. Therefore, investors and traders use it widely in their trading. But even though seasonality sometimes works quite accurately, it should never be the sole basis for deciding whether to buy or sell gold.