Best months to buy gold according to Octa analysts
In this article, Octa expert examines recurring seasonal gold patterns and their influencing factors.
Much like the vibrant blossoms of spring and the bountiful harvests of late summer, the world of gold exhibits recurring seasonal patterns or seasonality trends that influence its market performance. In this exploration, we delve into the profound influence of seasonality and cyclicality on gold prices.
Optimistic Outlook for Gold’s Seasonal Phase
A recurring pattern reveals an exciting seasonally driven period for gold that kicks off towards the end of the year, typically starting in mid-December and extending until the latter half of February. Research by Seasonax, based on a meticulous analysis of 54 years of data, underscores this intriguing phenomenon.
According to the data, the seasonal interim low usually materializes between the 15th and 20th of December, while the seasonal median high is typically reached at the end of February. Although there have been years with no discernible upswings, gold has shown a consistent upward trajectory for 14 out of the last 20 years during this same two-and-a-half-month span. This translates to a compelling 70% probability of experiencing a price surge during this period. Average gains during this phase have ranged from 8.5% to an impressive 18%, with comparatively minor losses varying from -1.6% to -3.3%, rendering it a profitable season each year since 2013. The sway of cultural influences and investor sentiment reinforces gold’s upward trend during this period.
Cultural Factors Fuel Jewelry Demand in Specific Seasons
Cultural traditions in India dictate that gold and gold jewellery be part of dowries, contributing to a surge in demand. With approximately 10 million weddings celebrated in India annually, the wedding season spans from October to March, aligning with milder temperatures and weekends marked by religious festivals. This results in the jewellery industry meeting nearly the entire annual gold demand within a relatively short timeframe.
“According to Gold Demand Trends Q2 2023 by the World Gold Council, India emerged as the world’s largest consumer of gold in 2022, purchasing 601 tonnes of gold, representing 28% of global jewellery consumption, with China closely trailing at 598 tonnes,” highlighted Kar Yong Ang.
China, too, mirrors this trend in gold jewellery demand.
Investor Sentiment Post U.S. FOMC Meeting in December
Before the December meeting of the U.S. Federal Open Market Committee (FOMC), the Commitments of Traders (COT) bulletins indicated that most investors held a pessimistic stance on gold, with 87% of futures traders assuming neutral or bearish positions. Notably, the seasonal interim low coincided with the period between December 15th and 20th, aligning with the date of the year’s final FOMC meeting.
Gold ETF flows form yet another component that synchronizes seamlessly with the aforementioned indicators.
Gold Fund Positioning in Q1
According to the World Gold Council, in 11 out of the last 15 years, funds increased their positions in the first quarter. They typically acquire gold in January, February, and March.
In Conclusion: Leveraging Gold’s Seasonal Insights
Seasonality plays a pivotal role in shaping gold prices, with a convincing 75-80% correlation in most cases. Consequently, both investors and traders utilize these seasonal trends extensively in their decision-making processes. However, it is essential to remember that while seasonality can be a valuable indicator, it should not be the sole basis for determining gold buying or selling decisions.
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