The Golden Age Has Just Begun

In recent issues of Seasonal Insights I have discussed two asset classes that tend to suffer performance problems in most years until the autumn, namely stocks and bitcoin. 

I thought you might for a change want to hear of an asset that will be in a seasonal uptrend over coming months.

Such assets do of course exist, and one that has particularly good prospects at the moment is gold.

You may well have already heard that gold prices typically exhibit strength in the second half of the year.

But when exactly does gold begin to rally, and how long does its strength last?

A close Look at the Seasonal Trend in Gold

Take a look at the seasonal chart of gold below. Contrary to standard charts, seasonal charts illustrate the average performance of an asset price in the course of a year. In this case the prices of the past 20 years were averaged. The horizontal axis depicts the time of the year, while the vertical axis shows the average price performance.

Gold price in USD per ounce, seasonal trend over the past 20 years

Gold begins to rise in early July. Source: Seasonax

The seasonally strong period is highlighted in dark blue on the chart. It begins on July 6 and ends on February 24 of the following year.

The average gain of the gold price in the seasonally positive time period amounted to 8.62 percent, or 13.90 percent annualized.

In the rest of the year, the gold price on average tended to generate a loss.

In short, the strong seasonal period is beginning right now!

Think About Christmas in Midsummer

Even though you are probably not thinking about Christmas in the sweltering heat of the summer months: the festive season is the reason why the seasonal rally in gold tends to begin now.

Gold is after all not only an investment asset and an industrial metal. An estimated two-thirds of annual gold production is used in jewelry fabrication. Gold demand for jewelry making thus has a noticeable effect on prices.