Gold Price Forecast: Golden Clues And Thanksgiving Patterns

Analyzing historical patterns is critical to understanding and gaining insight into possible outcomes for precious metals, or anything else for that matter. As the U.S. prepares to celebrate Thanksgiving on November 26th, it would be prudent to examine the course that gold has charted in previous November and December months.

Thanksgiving falls on the fourth Thursday of each November, which means that the holiday always falls between November 22 and 28. What’s usually happening to the price of gold before and after this period? Let’s check gold’s seasonality for Q4.

During this period, gold is usually just before forming a short-term top and starting the biggest decline within the final quarter of the year.

Please note that the accuracy measure as to when the top is likely to be is relatively low, but soars right before gold’s plunge. This means that while it’s not that clear when gold is likely to top, it’s quite probable that we are going to see some kind of important top regardless of when exactly that takes place. Could it be slightly ahead of Thanksgiving? Yes. Could it be slightly after it? That’s possible as well.

But this year is not like other years, and I don’t mean the pandemic. This year, particularly this November, is special because of the U.S. presidential elections. Therefore, instead of taking into account the average of the previous periods around all recent Thanksgivings, one should focus on the Thanksgivings which were concurrent with presidential elections.

Gold and Thanksgiving during the Presidential Election Years

Let’s examine the last four cases, when gold was already after the 1999-2000 bottom and within its secular bull market.

Starting with the most recent case:

Back in 2016, the decline simply continued after Thanksgiving, and gold bottomed in the second half of December.

Four years earlier, in 2012, gold topped right after Thanksgiving and – just like in 2016 – it bottomed in the second half of December.

In 2008, gold topped right before Thanksgiving and it bottomed in the first half of December.

Finally, in 2004, gold topped shortly after Thanksgiving, and it formed an initial bottom in the first half of December. However, it then declined once again, further reaching bottom in January and February 2005 (two separate bottoms).

Consequently, Thanksgiving during the U.S. presidential election year had a bearish follow-up for gold in practically all four cases. Sometimes it was a bit early and at other times a bit late, but overall, it seems that one should be prepared for declines in the yellow metal during the final days of November and early part of December.

This pattern fits in line with my other thoughts on the gold market. As the USD Index appears to have ended forming its broad bottom pattern, it’s likely to rally, causing gold to slide. At some point gold is likely to stop responding to the dollar’s bearish indications, and based on the above analysis, we expect this might take place in December.

Summary

This year’s Thanksgiving and December to follow will be unlike any others. There have been not one, but two elephants in the room; a turbulent post-election reality and a devastating unknown factor in the form of Covid-19. However, the clouds are clearing as evidenced by president-elect Joe Biden having won a clear majority and multiple vaccines that will help alleviate the burden of the coronavirus on the horizon. Investors will be ready to jump into riskier assets in the coming months, and when they do, gold’s decline is certain.

In other words, the following days are not likely to be pleasant times for anyone who jumps on the bullish bandwagon just because prices moved higher in the previous months. But what’s profitable is rarely the thing that feels good initially. As silver often moves in close relation to the yellow metal, forecasting gold’s rally without a bigger decline first is thus likely to be misleading. Silver is likely to slide as well. The times when gold is continuously trading well above the 2011 highs will come, but they are unlikely to be seen without being preceded by a sharp drop first.

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Przemyslaw Radomski, CFA

Editor-in-chief
Sunshine Profits - Effective Investments through Diligence and Care

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All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

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