The Strange Behavior Of Gold Investors From Monday To Thursday

Tyler Durden's picture

Authored by Dmitri Speck via Acting-Man.com,

Known and Unknown Anomalies

Readers are undoubtedly aware of one or another stock market anomaly, such as e.g. the frequently observed weakness in stock markets in the summer months, which the well-known saying “sell in May and go away” refers to. Apart from such widely known anomalies, there are many others though, which most investors have never heard of. These anomalies can be particularly interesting and profitable for investors – and there are several in the precious metals sector as well.  Today I am going to introduce one of those to you.

As Donald Rumsfeld, former secretary of defense knew, there are things we know we know, things we know we don’t know, and things we don’t know we don’t know (unfortunately he neglected to consider that there are also things we think we know that just ain’t so, such as “Saddam has WMDs” – but let’s not digress). Anyway, Seasonax knows them all! [PT]

Gold investors dead asleep for days?

To this end we are going to examine the performance of gold and gold stocks broken down by days of the week.

The first chart shows the annualized performance of the gold price in USD terms since 2000 (black bar), as well as the annualized gain generated on individual days of the week (blue bars).

I have measured the returns based on closing prices, thus the performance achieved on Tuesday equals the average percentage change between the close of trading on Monday and the close on Tuesday.

Gold, performance by days of the week, 2000 to 2017.  Friday stands out markedly

 

As the chart illustrates, one day really stands out: Friday. With an annualized return of 7.50 percent it reflects almost the entire annualized gain of 8.84 percent generated by the gold price over the time period under review.

By contrast, almost nothing noteworthy happened in the gold market from Monday to Tuesday. On Tuesday prices even declined slightly on average.

The difference – which has been measured over a period of no less than 4,585 trading days – is obviously quite significant. This suggests that these patterns are not a coincidence.

Gold investors indeed appear to be mired in deep sleep from Monday to Thursday, or at the very least they are showing very little enthusiasm on these days.

 

The days of the week under the magnifying glass

What exactly was the cumulative trend in this pattern over time? The next illustration shows the indexed performance of gold since the turn of the millennium in gold color, as well as that of individual days of the week in other colors.

Gold, cumulative performance by days of the week, 2000 to 2017, indexed.

A steady uptrend was in evidence on Fridays – click to enlarge.

 

As the chart shows, prices essentially tended to move sideways over the first four days of the week. Only in 2009 did Wednesday (green line) manage to generate a somewhat stronger average return as well.

The gains in the gold price over the entire period of almost 17 years were primarily achieved on Fridays. The blue line depicting the cumulative returns achieved on Friday is in a very steady uptrend. On Friday prices frequently even managed to rise even when the gold price declined overall in the course of the year, such as e.g. in 2014.

In short, Friday is indeed quite an unusual day.

 

The action in gold stocks is even more extreme

Given that Friday appears to hold a special position in the gold market, the question arises whether and to what extent gold stocks are affected by it. After all, the trend in gold stock prices depends on the trend in the gold price.

The next chart therefore shows the annualized performance of the HUI Index of unhedged gold mining stocks since the turn of the millennium (black bar) vs. the annualized performance achieved on individual days of the week (blue bars) since the turn of the millennium.

HUI, performance by days of the week, 2000 to 2017 –  Friday shines brightly, Monday is weak

 

Once again Friday is the by far strongest day. Its special status is even more pronounced than in gold itself: gold stocks on average rose by 13.28 percent annualized on Fridays, while the HUI on average gained only 5.76 percent over the week as a whole.  Or putting it differently: Investors who were exclusively invested on this single day every week, were able to achieve more than twice the return delivered by a buy and hold investment!

Moreover, in gold stocks the patterns from Monday to Thursday show a lot more differentiation than those in gold itself. For instance, the average gain recorded on Wednesdays actually exceeded the cumulative gain in the HUI over the week as a whole as well. By contrast, the average performance on Mondays was truly abysmal. Someone who invested in the HUI exclusively on Mondays would have suffered an annualized loss of 9.40 percent!

 

The weekly performance of gold stocks under the magnifying glass

The question of the cumulative performance broken down by days of the week arises in connection with gold stocks as well of course. The next illustration therefore shows the indexed returns of the HUI Index in gray, and those of individual days of the week in other colors.

HUI, cumulative performance by days of the week, 2000 to 2017, indexed.  Knocking it out of the park: Friday beats them all.

 

As the chart shows, the blue line depicting the performance of the HUI on Fridays faithfully tracked the rally in gold prices in the first several years after the turn of the millennium. However, a welcome divergence emerged during the financial crisis of 2008, which had almost no discernible effect on the performance achieved on Fridays.

Thereafter, the blue line by and large continued its ascent (only briefly interrupted in annus horribilis 2013), even though the trend in the HUI as such was quite dismal in recent years. Currently the cumulative return achieved on Fridays stands far above that generated by the HUI.

This once again underscores how extraordinary the performance of gold mining stocks on Fridays actually was.

Compare this to the terrible downtrend in gold mining shares on Mondays, which is found at the very bottom of the chart. The yellow line declines steadily. On Monday, prices even tended to decline in years that were otherwise strongly bullish for gold mining stocks.

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Son of Captain Nemo's picture

What an absolutely "blisteringly beautiful" backdrop of Donald Rumsfeld's "known knowns" quote after the lead up to the Iraq war after 9/11 and it's "linkages" to the analogy of the current and (past 50 years) of manipulation of the PM market(s)!...

Says everything about the "known knowns" when .gov IS ALLOWED TO fuck up both foreign policy and economies through THEFT!!!

auricle's picture

great, I'm gonna be in the green tomorrow. 

anarchitect's picture

Here's a simple interpretation that should account for some of this.

What happens over the weekend is an known unknown.  So gold is bought on Friday as a hedge.  And so gold stocks rally.

On Monday, when nothing bad happened over the weekend, gold stocks are sold.  Not sure why it takes longer for gold itself.

GeezerGeek's picture

What usually tripped me up was a "known known: that turned out to be untrue.

And speaking of Rumsfeld, why are we paying any attention to him? Apparently Bush 43 didn't.

http://www.breitbart.com/big-government/2017/11/05/george-w-bush-bashes-...

From the story:

Former President George W. Bush went off on his former vice president and defense secretary, stating bluntly that “they did not make one f****** decision.”
philipat's picture

The missing information here is HOW MANY of the 52 Fridays each year accounted for the average Friday gains? I would guess that just a few Fridays account for the vast majority of the Friday gains because in times of crisis or uncertaintly, investors tend to be long Gold over weekends just in case of either a crash in everything else at market open on Monday OR the possibility that the Banks/Markets don't open on Monday?

kiwimail's picture

My thoughts exactly, Phili.  Gold is primarily an insurance policy so on Fridays you are paying a premium for two days of coverage instead of just the overnight premium the rest of the week.  Would be interesting to see performance for the day before a holiday or long weekend!

Tapeworm's picture

 But it's all derivatives trading- not physical.

 Like today Friday 10 Nov; bust paper gold for ten bux in two minutes.

Xena fobe's picture

And is this at open, closing or intraday? 

Dsyno's picture

It's the difference between the open and close each day.

philipat's picture

Because many of Government's "Known Knowns" in the public domain are, in fact, propoganda. 9/11 would be a good example but Vegas is approaching the same level of BS?

scaleindependent's picture

GeezerGeek,

Bush Jr is still butt sore Cheney was the acting president. Bush Jr subconsciously realizes he was just a poster cowboy for the neocons, although he cannot consciously admit that, yet!

Kafir Goyim's picture

Friday night in London, Saturday morning in Asia.  Both times that bankers and government types are more likely to be not working.  It seems like the manipulators live in one of those places.  Maybe it's China, trying to keep gold cheap, which keeps the dollar stronger, which keeps the yuan relatively weaker.

philipat's picture

But remember that a lot of the CB/Cartel manipulation takes place on Friday AFTER the Physical markets in Asia (eraly morning NY time, when Gobex trading volumes are very low) and London (so basically the afternoon Comex session), have closed. So that would tend to scew prices in the opposite direction?

DisorderlyConduct's picture

Everyone I know buys on Friday. Payday. But that's retail...

Rex Andrus's picture

Um yea, a double bottom IN A RIGGED MARKET

silverserfer's picture

 i diddnt know i was an investor. I was busy working and taking care of my family. good to know. or not know . whichever. 

Pitty's picture

Known by Rumsfeld and any even half brain dead humanoid, 911 was an inside job by him and his cronies, paper gold/silver is manipulated to silly low prices and any analysis is pure stupidity and a waste of time only benefit thank God is my local silver/gold dealer still sells me physical gold and silver at these silly historically low prices in the face of a coming financial meltdown

Give Me Some Truth's picture

Rumsfeld orchestrated the 9-11 "inside job?" He'd only been serving as secretary of defense for eight months when the attack occurred, so he must have started planning from Day One. And he ordered an attack on the Pentagon where he was working that day? Ok. As you say, everyone with half a brain knows this.

bardot63's picture

This author confuses real gold with paper gold.  Yes, I was asleep all week.  I have gold so that I CAN sleep between Monday and Friday. 

0hedgehog's picture

Let's see, do I want to buy 6 ounces of gold or one pretend coin in a pretend wallet that I can't hold in my hand?

 

HMMMMMMMMMMMMMMMM......tough choice.

moonmac's picture

Sorry folks it's an E-Bubble for sure!!!

My 10,000 collectibles will drop in value big time. Good thing I only paid a dollar or so for them at Goodwill over the last decade. Buying a couple antiques a day on my lunch hour is great therapy for a stressful sales job at the factory.

razorthin's picture

I suspect that increased trading of weekly options has something to do with it.

Catullus's picture

Does the futures contract ever expire on a Monday?

scaleindependent's picture

Saddam Hussein not having WMD was a "Known Known".  That is to say, the motherf#kers knew he did not have them but just decided to sell the American people another lie.

slipreedip's picture

Conclusions: 

 

People pick up their gold before they assume the world will turn to shit over the weekend.

 

Algorithms doing their weekly adjust to the gold price so people know nothing has changed.

David Wooten's picture

Thanks for the info, Dmitry, but, as you have published your study, it's too late for US (or you) to continually buy gold at Tuesday's close and sell at Friday's close.  In the financial world, what everyone knows is not worth knowing.  If you were smarter you would have used your study to enrich yourself.  

ThinkAgain's picture

Gold is BS. Gold is dead stuff, not economic active. See http://www.planck.org/publications/Gold-vs-EQE-EBS.

The best backing of a currency is trade credit. See http://www.planck.org/publications/BQE-Bilateral-Currency-Swaps.

The gold market is manipulated since 1913: who want to be the toy of those: go ahead: feed the enemy.