The Interesting Seasonal Trends of Precious Metals

Precious Metals Patterns

Prices in financial and commodity markets exhibit seasonal trends. We have for example shown you how stocks of pharmaceutical companies tend to rise in winter due to higher demand, or the end-of-year rally phenomenon (last issue), which can be observed almost every year. Gold, silver, platinum and palladium are subject to seasonal trends as well.

Seasonal Analysis with our Web App

We have used our Web App (app.seasonax.com) to show you the seasonal trends in prices for precious metals. The chart below depicts the seasonal pattern of the gold price. It shows prices over a specific time period, in the form of the average performance of prices over many years in the course of one calendar year.

Gold Price in USD, seasonal trend over 34 years

Gold prices tend to exhibit a seasonal rally in the second half of the year, with the bulk of the advance beginning in early August. Looking at the following year, one can observe that the rally continues throughout January. The area with the slightly darker blue background highlights the positive seasonal trend in the chart above.

Gold Price, 1 year

The price of gold typically rises from early August until February - Click to enlarge

The Gold Price has Increased 23 out of 33 Times in the Positive Seasonal Time Period

The positive seasonal period between August 7 and February 1 of the following year has been characterized by rising gold prices in 23 out of 33 cases. The average profit in rising years was 8.87%, while losses averaging 5.22% were posted in declining years.

The bar chart below depicts gold price returns over the positive seasonal time period for every year since 1971. Years in which gains were recorded are represented by blue bars, years in which losses were recorded by red bars.

It can be clearly seen that gold tends to rise more often than decline in this time period and that the advances are stronger than the declines – the green bars depicting positive returns are both more frequent and larger than the red bars. It is also evident that even this positive seasonal time period for gold failed to generate large returns between 1980 and the late 1990s – which is not surprising, as the gold price was mired in a large-scale bear market over these years.

Gold Price 1985-2017

Gains (blue) have been recorded more often than losses (red). - Click to enlarge

The Festive Season is More than Just Christmas

The main reasons for the positive seasonal gold price performance between early August to late January are various festivities. After all, gold is not only an investment asset and an industrial metal. Around two thirds of  annual gold production are used in jewelry. Not surprisingly, jewelry fabrication therefore affects prices. The festivities in turn are taking place at specific times of the year – and the associated gold purchases are following a similar pattern. There is not only Christmas near the end of the year, but major festive occasions in Asia are at least of equal importance, namely the Chinese New Year celebrations in February and the Indian wedding season in autumn. Gold is frequently given as a gift on occasion of these festivities. Naturally, jewelry merchants are stocking up on gold prior to the festive season and tend to push up the gold price in the process.

What About Silver?

As our seasonal analysis (app.seasonax.com) has shown, silver’s industrial metal characteristics are far more pronounced. The next chart illustrates the seasonal trend of the silver price.

As you can see, the seasonal price trend of silver in the course of the year is completely different from that of gold. Silver typically rises rapidly from the beginning of the year until the end of February. The annualized returns are considerable: they amount to 61.82% in the time-period from January 1 to February 23.

Silver Price, 1 year

Silver exhibits a distinct and strong seasonal rally at the beginning of the year. - Click to enlarge