Plans and Consequences

You are probably already getting into the holiday spirit, perhaps you are even under a little stress. But the turn of the year will soon be here – an occasion to review the past year and make plans for the new one. Many people are doing just that – and their behavior is creating the strongest seasonal rally in the precious metals markets.

 

Anonymous industrial stackers showing off their freshly purchased silver hoard. [PT]

 

Silver is seasonally cheap in mid December

First let us look at the seasonal chart of silver. The chart shows the average moves in silver prices in the course of a calendar year over the past 69 years. The horizontal axis shows the time of the year, the vertical axis depicts price information.

With the help of this chart, seasonal trends can be identified at a glance. Note: the seasonal pattern does not end at the turn of the year, but actually continues at the beginning of the year (i.e., on the left hand side of the chart).

 

Silver price, seasonal pattern over the past 69 years. Silver prices typically rise very strongly until the end of February

 

As the chart illustrates, on average silver tends to post the by far strongest price gains early in the year until peaking close to the end of February. This rapid advance actually begins in mid December (blue arrow). Thereafter the price typically retreats again.

Thus silver makes a move in excess of its total annual seasonal gain over the coming two months!

 

The seasonal rally is caused by fundamental drivers

The strong seasonal advance is very likely driven by purchases from the manufacturing industry. Many industrial silver processors/users place the bulk of their purchase orders at the beginning of the new financial year once annual planning has been completed and new orders can be booked.

If you purchase silver ahead of this phase – to be precise, in mid December – you will buy at a fairly reasonable price from a seasonal perspective and stand to benefit from the strong seasonal rally.

 

Platinum prices offer a seasonally favorable entry in mid December as well

But what is the situation with other precious metals? Next I will show you the typical seasonal pattern of platinum over the past 32 years.

 

Platinum price, seasonal pattern over the past 32 years.
Platinum also tends to rally strongly starting in mid December

 

As the chart shows, platinum exhibits a very similar seasonal pattern. Just as silver, it rises strongly from mid December almost to the end of February.

Contrary to silver, platinum displays a further seasonal advance in April, but subsequently these gains tend to be retraced almost in their entirety.

In light of the fact that similar to silver, the seasonal rally in platinum is associated with the turn of the year, it is probably attributable to the same fundamental reason: purchases related to the new financial year.

 

Gold, silver, platinum: all the same?

You may now think that the seasonal trends of gold look similar. After all, there is a strong positive correlation between silver and gold prices. Or could it be different, given that the fundamental drivers moving gold prices are not the same?

If you want to find out about the seasonal patterns of gold, or those of your favorite stocks, or if you want to learn about optimal timing of entry and exit points with seasonal data, I recommend visiting www.app.seasonax.com – which can be used free of charge for gold and other important instruments. If you are an institutional investor, call up the Seasonax app at Bloomberg or Thomson-Reuters Eikon.

 

PS: Happy Holidays from the Seasonax Team!

 

Dimitri Speck specializes in pattern recognition and trading systems development. He is the founder of Seasonax, the company which created the Seasonax app for the Bloomberg and Thomson-Reuters systems. He also publishes the website www.SeasonalCharts.com, which features selected seasonal charts for interested investors free of charge. In his book The Gold Cartel (published by Palgrave Macmillan), Dimitri provides a unique perspective on the history of gold price manipulation, government intervention in markets and the vast credit excesses of recent decades. His ground-breaking work on intraday patterns in gold prices was inter alia used by financial supervisors to gather evidence on the manipulation of the now defunct gold and silver fix in London. His Stay-C commodities trading strategy won several awards in Europe; it was the best-performing quantitative commodities fund ever listed on a German exchange. You can find an introduction to the Seasonax app and in-depth information on what it can do here. Furthermore, here is a complementary page on the web-based Seasonax app, which costs less and offers slightly different functionality (note: subscriptions through Acting Man qualify for special discounts – for both the Bloomberg/Reuters and the web-based versions of the app. Details are available on request – simply send a note to info@acting-man.com with the header Seasonax!). PS: in the run-up to Christmas, very large special holiday discounts are available!

 

Charts by Seasonax

 

Chart & image captions (where indicated) by PT

 

 

 

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Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

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One Response to “The Strongest Seasonal Advance in Precious Metals Begins Now”

  • Patrick:

    While Gold and precious metals more often than not enjoy a rally at the beginning of each year, in most of those cases they’re rebounding off of a major sell-off that began in the 3rd or 4th quarter. This year we’ve seen the opposite, and for several reasons beyond this, I’m predicting a major sell-off in PMs after a brief head fake. Not being one to make unsubstantiated predictions…here’s my reasons.

    ○ Dems have given it their best and the Trump impeachment is now DOA. They’ve got no ammo left with insufficient votes to pass in Congress. I predict they’ll turn on each other and markets will revel in the resulting higher odds of a Trump re-election.

    ○ Gold technicals look awful. GoldPrice.org spells it out… 3 lower highs / 3 lower lows. Refer to its chart in August 2016 for the outcome when Gold runs out of buyers and the big banks are net short.

    ○ The trade war is winding down as Trump now needs to inject a stream of market positive (and gold negative) news to cash in on 2 years of good cop / bad cop market pumping.

    ○ The Fed is on hold with rate cuts. While I think they’ll restart later in 2020, I think there’s enough momentum from existing low rates to carry markets.

    ○ QE is only good for gold during bad times. The jury is still out on the effects of ‘pre-emptive’ QE but the fact that gold has responded with a big ‘meh’ by not being retaking even $1500/oz, despite over $380B in planned Fed easing speaks VOLUMES.

    ○ New information is coming out that the ‘blow up’ in the repo market is increasingly looking like the result of banks pulling cash out of inter-bank lending to instead go ‘all in’ on stocks for 2020 vs a bank insolvency problem.

    And to put my money where my mouth is, I have positioned my trades for a sell-off; placing my entire retirement account into DUST but hedged in cash.

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