Investors familiar with the Gold Market might know that there is seasonality to the price fluctuations of both gold and gold mining stocks. As I say this it is important to note that seasonality is never the only reason why an investor should decide to place an investment in any asset. Seasonality should be just one piece of what helps you decide as to when and how much should be allocated to any one particular investment class.
That being said, the recent price action in Gold should be grabbing your attention. First, in recent weeks Gold has performed fairly well considering its kryptonite, The US Dollar, appears to have caught a bit of support and may be showing some signs of a possible intermediate term bottom which could put the seasonality argument to test.
The seasonality of Gold suggests Gold prices and Gold stock prices tend to show weakness and volatility as the winds of change kick up in spring and continues into the dog days of summer. After a rest in spring and summer Gold tends to have an appetite to finish the year strong in the fall and winter months. For some interesting data and charts check out an article by the staff at Minyanville. You can access a copy of the actual article by clicking here.
In reviewing the data provided in “Entering a Strong Season for Gold” the author provides this table of HUI, an index of Gold Mining stocks while stating “There has been only one down period during the second half of the year which occurred during the 2008 financial crisis.”
Outside of the miners, Gold itself has also tended to have a better back half of the year as seen in the following chart provided in the same article.
All this could possibly suggest the recent low seen in Gold during the June sell off could mark an interim bottom in the yellow metal. Typically June would be a little early for a seasonal low. However, there are some technical indicators that may be suggesting that buying pressure could be building.
“This year so far the bottom in buying pressure has actually been in May even though gold stocks made a lower low in June. If the trend higher in buying pressure has started this early then there’s a chance June has seen the lows of the year” states the Minyanville article.
With a back drop of unsustainable debt throughout the globe and growing obligations, the fundamentals and technical’s continue to support the need for investors to consider examining their portfolios for the amount and type of exposure they have to gold and other hard assets. As chaos and crisis seems to be a bed fellow we may have to entertain for some time to come you might as well benefit from it by knowing your options. You can do so by Joining us July 22nd for our next event “Making Chaos and Crisis Your Friend”where we will discuss topics such as how we got here and where opportunities may be found within the current cycles of markets.
Keep your eyes peeled for our next issue as it is a sure read for those with assets parked in money market accounts. In “Busting the Buck” we will discuss how some of the largest money market funds have beefed up on European debt in an effort to boost yield. Buyer Be Ware – your money market may not be as safe as you expect it to be.
Until then enjoy the summer weather and remember profitability begins from within.
The opinions expressed are those of Colby Mcfadden and Quiver Financial as of July 10 2011 and are subject to change due to market or other conditions. This is not a solicitation or recommendation of any investment, always consult a Financial Advisor before investing into any investment. Securities offered through Newport Coast Securities member FINRA/SIPC. Advisory services offered through Newport Coast Securities a SEC registered investment advisory.