GOLD SEASONALITY: THE BULL CONTINUES
Ben Davies, founder of Hinde Capital, was recently on King World News to discuss his outlook for the gold market. Davies is wildly bullish about gold and has a fairly similar perspective on the metal as I do. He sees two of the primary drivers of gold being demand from China and the Euro crisis which is being perceived as a failure of fiat currencies. But Davies is also focused on a seasonal driver in the near-term. Since he believes we are in an environment that is consistent with the last ten year (easy Fed, negative real rates, strong demand from China, etc) he believes the seasonal trends should hold true. Davies says:
“You really don’t need to say much when you look at the chart, it’s extremely bullish. We took the current year and pushed it forward four weeks to adjust the seasonality. We realized that the market was working on a four week basis ahead of time and if we adjusted the seasonality by bringing it forward four weeks, readers can see that come October we were going to actually have a rally into the year end. Historically you would tend to see a dip in October, but we already had that dip in September.”
Source: King World News
Makes me feel very happy….go gold..
What is the sample for the red line? Seems like any time would be an excellent time to be bullish with 15% per year on average. Also, by having two scales, this chart hides the fact that YTD, we have already surpassed the expected annual return over the cherry-picked sample.
I would put very limited stock in this chart.
Wow stupid question. The rest of my comment stands though.
There is no cherry picked value. The red line is the seasonally adjusted value as calculated over the last 10 years. The red line shows where gold would be tomorrow (next week or month) if it behaved the same was as it did over the last 10 years for the next day (week or month). Naturally, there’s nothing to say it has to behave the same way, but it does give us a picture of what happened in the past.
Historically, it has been true. Also, indeed, monetary environment is consistent with last 10 years trend and very favorable to gold both in US and EU. Hopefully, we’ll have a rally.
Cullen, this chart does not stand up to the rigor of your posts
Lies, damned lies and statistics.
Not that I am not a gold bull, but this chart is trying to fit to the argument and even then its doing a poor job.
Pathetic.
Ben Davies forgot more about gold in the last 5 minutes than the above posters (except KB) will know in a lifetime. We just had a big correction in gold (off 20% fom August 2011 intraday highs) and where the MACD actually went below October/November 2008. Folks, that is a huge correction.
Gold hits $2,000/oz around year end. That’s Davies’ prediction, and I will bet he is right.
I hope yr right alex.
the posted chart though can be pulled apart swiftly as done by earlier reply’s but then so can your MACD divergence. everyone’s coming up with analogue overlays, wouldn’t bet the farm on them. but the gold stocks really stood out on friday, tier 1 notably – more gains ahead hopefully.
the indian buying season whether – is it wedding..or not – I’m not so sure , but its relevance has diminished quite somewhat since gold has come more out in the light vis a’ vis the bear market in the 80′s & 90′s where the traders of the day (I assume) thought of it as a reliable fundamental driver.
I’m with Alex. Ben Davies is a well known, well respected and successful precious metal guru. But he also understands politics and economics.
One other thing.
I have 10, 20, 30 and 40 year seasonal gold charts. They all look about the same. Ben Davies knows this so he is not cherry picking. When you know seasonal patterns persist it is wise to use the most recent data as they typically have more relevance.
But, China will probably flop and then flap…. Real estate bubble. What then you will say about gold? Your prediction anchors on China to keep growing like the pink bunny. Will not happen?
“Mr Obama calls himself an “underdog” in next year’s election because the economy has not been performing during his tenure in office. It is true that Mr Obama has presided over – by far – the biggest government spending binge in history. But the performance of the US economy did not start declining in 2009. It has not been performing for four DECADES. [i]The reason is very simple. It has been forty years since the last shred of fiscal discipline was removed from the US government.[/i]”
~ Bill Buckler
I’m no professional by a long shot, but I can say with total confidence that
it doesn’t really matter what past performance has been or what the charts
currently dictate….. because the DAILY ‘headgames’ and purposefull
manipulation in this market and others make it pretty much IMpossible to say
which way the asset will go ‘tomorrow’, let alone next week or next month.
The little guy trader is going insane with trying to figure it out and actually
make money consistantly. This comment is not meant to be negative or a slam
at the commentary, but only an Honest fact and realization for Me and many others. If ‘We’ could figure out the Pre-Manipulation going on, Now that’d be Cool indeed!!
Time shifting when comparing to seasonal patterns is a BAD PRACTICE. Current data might not fit historical seasonal patterns, but that is not a problem. Shifting to make it look better is a problem. Leave the time scales alone and draw whatever inferences you can without shifting. I don’t personally place much weight on seasonal patterns. They do have some validity, but other factors can, and often do, override seasonal tendencies.
Well its bizarre but maybe its a good time to buy a little more.
In gold we trust.
In silver we trust.
In reality we trust.
I’ve stayed 90% to 100% in physical gold and silver for years, and cannot imagine in my wildest dreams why people talk about 5%, 10%, 15%, etc. Why on earth would anyone want to be invested in [fiat] paper that can be manipulated by the predators-that-be, predator-class and banksters? Just crazy! I will say that active physical assets like productive equipment and supplies can be even better than static physical assets like gold and silver… IF you operate those assets to produce an endless stream of real physical goods. This includes farmland and related equipment as well as other productive equipment.
Honestann is certainly right that static assets, such as gold and silver do not produce any return, so that in a year or a hundred years, an ounce of metal remains an ounce of that same metal. Further, if the price increases due to inflation, a U.S. taxpayer will be subject to an income or capital gains tax when it is sold, which means that after tax he will have the ability to buy less metal than when he stated. Thus, to break even in real value, the investment must be leveraged enough to offset the investor’s income tax rate.
As depressing as that is, the recent, and likely future, reality is that this performance is better than that of most stocks and other U.S. investments. Bad overall investment performance will continue as long as the governments are taking such a large portion of the economy and spending it on what has a low return, no return or even damaging to the economy.
Gold has been trading in a relatively static range for months. Time for a breakout – up or down. Waiting for the butterfly to flap its wings.
All the markers are in place. The dollar is toast. Ergo, precious metals will be the ONLY means of one retaining their purchasing power. As stated above, an ounce of a PM is still an ounce years later. Case in point, when I was a boy, a paper dollar and a silver dollar were the same value. Today, my silver dollar is worth over twenty-five paper dollars. My paper dollar (thanks to the fiscal stewardship our govt. and especially congress has shown) is now worth about 4% of what it was before.