John: It is well known that the price of many commodities varies with the seasons. With Orange Juice, for example, the price can increase greatly at the first mention of frost, but what about Gold – does its price vary with the seasons?
To answer this important question I looked at an 11-year monthly chart of Gold with specific interest in the mid-year 4 months of May, June, July and August.
Looking at the chart, we see first of all the present uptrend in Gold started in April, 2001, and has been continuous for the last 10 years. That in itself is truly remarkable. As previously stated I am presently interested in the 4 months of May, June, July and August, so to make identification easy I identified the month of May for each year starting in 2001 by a vertical thin blue dashed line. A White Candle is an “UP” month and a Red Candle is a “DOWN” month. Results are below:
2001……….May “W“, June “W“, July “R“, August “W”
2002……….May “W“, June “R“, July “R“, August “W”
2003……….May “W“, June “R“, July “W“, August “W”
2004……….May “W“, June “R“, July “W“, August “W”
2005……….May “R“, June “W“, July “R“, August “W”
2006……….May “R“, June “R“, July “W“, August “R”
2007……….May “R“, June “R“, July “W“, August “W”
2008……….May “W“, June “W“, July “R“, August “R”
2009……….May “W“, June “R“, July “W“, August “R”
2010……….May “W“, June “W“, July “R“, August “W”
2011……….May “R“, June “R”
Overall
May W – 7, R – 4
June W – 4, R – 7
July W – 5, R – 5
August W – 7, R – 5
The above results show that there is a definite seasonal trend in Gold prices during the 4 mid-year months with June being the low month and then price strength picking up in July and getting stronger in August.
What information does the chart give us? Well, looking at the RSI we see that a divergence between the Gold price and RSI has been identified and suggests that some weakness right now should be expected. The RSI is high and has plenty of room to move lower before meeting support. The %B is operating in the high part of the stable zone between .75 and 1.0 and has room to drop lower without becoming extreme. The monthly SMA(30) is a close supporting moving average and is used in the %B indicator.
Conclusion: Given the above results, any weakness over the last half of June should be followed by strength later in the summer, in particular by August.
