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GOLD: Will This Summer’s Rally Mark A Cyclical Turning Point?
We focus on gold's seasonality in this column and what it could mean for gold's secular trend.
Between 1982 and 2012, gold typically started rising in early July, corrected slightly in October, and finished the year strongly higher. The first chart, courtesy of our friend, author, and market analyst Dimitri Speck, shows that the second week of June typically kicked off the yearly rise with a final dip.
Courtesy: Seasonal Charts
Included within that 30 year time frame was a secular bear market (until 2001) and a secular bull market (as of 2002). We look more closely at gold's seasonality since the secular bull market started in 2002. The second chart, courtesy of StockCharts, shows the number of months in which gold closed higher than it opened. Clearly, July through September stand out with the largest number of higher monthly closes, while October is one of the weakest months in the year.
The same seasonality picture for the period between 1990 and 2000, the last decade of gold's secular bear market, shows a random picture of up and down months, without a consistent rise during the summer months. We assume that is typical behavior during a weak market.
We conclude that gold bulls want a strong summer which will confirm that the gold secular bull market is still intact.
Looking one level deeper into the summer rallies in the current secular bull, we found some interesting insights. The table below shows the exact period in which gold had a summer rally, along with the % price rise in USD. Interestingly, we see that gold started to rally between June and mid-July in 8 out of the last 10 years. Over that same period, the average price rise during those rallies was 16.3%.
What does this mean in the context of the current cyclical bear market within gold's secular bull? To answer that question we rely on the long term trendlines on the weekly and monthly charts. The trendline on the weekly is marked in red.
The general rule is that the significance of a trendline increases substantially with every touchpoint. The red trendline on the weekly chart has the highest number of touchpoints. We believe that gold broke out mid-March of this year, as indicated with the green oval. One could argue that the breakout went unnoticed, as few have spoken about this “event,” concluding that it was unimportant. Our view is the opposite. Because it went unnoticed during a cyclical correction (bear market), it increases the odds that it was THE important event. That is how bear markets end, and especially when nobody talks about it.
This summer's seasonality is quite important. If gold's summer rally is strong, we will conclude two things.
- First, we will have a confirmation of the seasonal trend during the secular bull market, increasing the probability that the secular bull is still intact.
- Second, the probability increases that the breakout point already occurred in March.
However, even if the summer rally does not occur and we see a continuation of the sideways pattern, there is still evidence that gold remains in a secular bull market. The next chart shows that the secular trendline marked in blue will touch the $1200 price level in about a year. That means gold can trade sideways for a year without invalidating its secular bull trend.
Smart investors do not anticipate a particular move, they prepare themselves for what is likely to happen. A breakout in gold and silver is a high probability move. That is why we recommend an investing roadmap based on the very best gold and silver plays.
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There they go, analyzing charts like it's some sort of free market.
When the shit runs out, something may change. Not before. Without any oversight whatsoever, anything's possible, legal, and encouraged.
See MF Global debacle for a clue. Celente learned the hard way.
Exactly. It makes me laugh-all of this wasted time analyzing bullshit charts like they have historical significance. In the new economy- old charts make nice asswipe.
In a world of full manipulation, do charts work?
Don't you just have to look at how long the manipulation can continue?
All them fancy charts ain't worth dick.
The long answer: Do chickens have lips?
Pussies do.
You can take seasonality charts and shove 'em where the sun don't shine - as long as JPM is allowed to corner $4 t in commodity derivatives, they simply draw the chart first and let the algos hug the trend line downward. And NEVER will the E/S be allowed to break the six-year uptrend line. Seasonality only works in a free market sans manilpulation and central bank planning.
Take a look at that chart showing the long term trend. Someone should tell Tyler that Gold wasn't $450/oz. in 2001.
This summer's rally. What this summer's rally. There was none. Is this a wishing & hoping column? Are we supposed to close our eyes and click our heels? Newsletter writers getting a mite desperate.
The charts say we have been in a bear market for almost 4 years. They also say we have been testing resistance at $1150 for almost a year now. To say we have been trading sideways is a stretch - look at all those lower highs. We are almost at the breaking point, and the lower resistance line will not hold for another year. The smart money is eaither in cash, or shorting the Gold market. They smell blood, and are within inches of bringing this wounded animal down.
"bringing this wounded animal down."
The only wounded animal I see is the Fiat.
Agreed and silver too. Look at SLV ~$15 as a good enough proxy. $15 is now resistance and they can run stops big time.
Bring gold down? You've got to be kidding.
To what and for how long?
Hell, I'd be backing up my truck at $500.00/oz.
I don't know how low Gold will get. I suspect $1000/oz. is in the cards, but I don't know if that is just another resistance point, or if it is the new rallying point. I do know that most newsletter writers are simply telling you what you want to hear, and have no real idea what the price of gold will be next week, next month, or next year.
I'll be a buyer at 1k/oz. - that's for certain.
Yes, it will rally bigtime......up a few bucks. Seems to be headline worthy if it jumps that much in a day anymore.
Look here, Mr. Cynic, up a few bucks is a "surge" in ZH parlance.
No.
When PM's start going up no matter how much manipulation, then we'll truly be in the endgame........
Answer: No.
Gold is going to $500 over the next few years.
If Gold would go down to $500, how many Miners would still be left?
Gold opperations should put up the funds, dig the shit up & sit on it until a large nations gold backed currency moves into place. The price of the finite resource known as gold will skyrocket.
This was done successfully in Lybia until the Banksters puppet USA moved in to end the Gold Dinnar.
Irrelevant question, they are fucked now.
The miners are of zero importance. TPTB want the gold, and when the miners are bankrupt, the the banksters will scoop them up for pennies on the dollar. All part of the plan. Why do you think China has a multi-billion dollar mine development fund? They see that Western gold will eventually be withdrawn from the market by the banksters, and China will have to aquire it's gold from other sources.
Just buying the mine does not give you the gold. It is still in the ground and is very expensive to get out!
This is one of the things that makes gold money.
A bird in the hand is worth two in the bush
I completely agree. So TPTB own the major gold deposits of the Western world, then proceed to set the Gold price at level very favorable to themselves. That's how a monopoly works.
Methinks all these gold mining shows on Discovery channel, et al, are going the way of the dodo in short order....
Can you explain to all of us how you arrived at this? I cannot envison anyone making such a prediction without suporting data.
Politicians habitually do such things.
Shit on toast man, do you have no sense for sarcasm?
Do you also respond earnestly to those whose sisters earn $800 working for two hours on the internet?