A Nugget Of Gold Or A Lump Of Coal For The Holiday Season?

In two recent articles, I commented on the seasonality of the gold price and predicted short-term trends (Mercenary Musings: October 19 and October 26, 2015). Today, I examine the 12-year performance of gold during the pre-holiday to post-New Year time frame. The price charts are normalized to November 1 for each year and show the daily movement of gold on a percent change basis:

Here is a tabulation of the pertinent price data for November 1, December 15 and January 31 of the following year:

Gold  $ / Oz

Items to note from the charts and table (anomalous years highlighted in red):

• In 8 of 12 years, gold was higher on December 15 than on November 1.
• In 7 of 12 years, gold was higher on January 31 than on December 15.
• In 8 of 12 years, gold was higher on January 31 than on November 1.

I glean that the gold price most often goes up from November 1 to December 15 to January 31. However, the trends are not as compelling as my previous treatment that covered the five months from June 1 to October 31. This is especially true since the bear market for gold began in December 2011.

Supply-demand fundamentals influencing gold price during the three-month period include:

• Jewelry demand that peaks during late November and early December when men buy their wives, girlfriends, and/or mistresses a gold bauble for the holidays.
• International trade, debt, and year-end book squaring in late December that are settled in US dollars. This increased demand for greenbacks can cause the gold price to dip briefly.
• Speculators move back into paper derivative markets in January and cause the gold price to rebound.

Finally, let’s take a look at the yellow metal’s recent performance:

Gold is down 9% since achieving a six-month high of $1184 on October 15. The fall in gold is inversely correlated with the rise in DXY, which has moved from the low 94 level to a recent eight-month high at 99.65:

The 12-year history indicates odds are 2:1 that gold will rally in the next 2+ months. But the above correlation chart shows what we really need to know: If the US$ remains at currently high levels, gold ain’t goin’ up anytime soon.                                                        

Note also that gold is down 8% year-to-date. If it closes 2015 below $1172 per ounce, this will be the third year of losses in a row. Folks, that last happened from 1996 to 1998.

Spurred by low prices, physical buying has recently come on strong from both central banks and the retail sector. Nevertheless, the four-year bear market for gold continues unabated.

And that presents buying opportunities for savers, i.e., those who neither speculate nor invest in gold.

The paper gold market has recently been a lump of coal for long traders trying to make a quick fiat dollar. But weak prices bring more nuggets of gold for those of us who hoard the most precious of precious metals as a safe haven against the machinations of the world’s central banksters.

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Mickey worked for junior explorers, major mining companies, private companies, and investors as a consulting economic geologist for over 20 years, specializing in geological mapping, property evaluation, and business development.  In addition to Mickey’s professional credentials and experience, he is high-altitude proficient, and is bilingual in English and Spanish. From 2003 to 2006, he made four outcrop ore discoveries in Peru, Nevada, Chile, and British Columbia. 

Mickey is well-known and highly respected throughout the mining and exploration community due to his ongoing work as an analyst, writer, and speaker.

Contact: [email protected]

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