Written by David Coe.
Gold, like all commodities, has a seasonal pattern that repeats year after year with a measurable probability.
Chart provided by www.seasonaltrader.com.
The size and regularity of the change in the gold price each September led BRW magazine to call September the Golden Month. Over the past 25 years, the gold price has fallen in only 5 Septembers.
The chart was developed by seasonaltrader.com, which was founded by institutional investment adviser Jake Bernstein, who advises a number of American banks and hedge funds that survived the global financial crisis. Bernstein has been a trader and market analyst for more than 40 years and has also written 41 books on investment and trading.
Bernstein says: “There are those who claim that seasonality does not exist or that it does not provide us with information that can be profitable. History is the ultimate judge of which side of this argument is correct.”
The most horrific September event affecting the gold price was the September 11 attacks in 2001. In 2005, Hurricane Katrina knocked out oil rigs in the Gulf of Mexico, which sent the price of crude oil soaring and triggered fears of inflation. In 1979, the Hunt brothers of Texas tried to corner the silver market and the price jumped by 49.5 per cent.
In 1999, a Bank of England gold auction was oversubscribed eight times after investors unexpectedly abandoned fears it would depress prices. In 2007, just as the financial crisis was about to erupt, smart money pushed gold to a 27-year high of about $US700 an ounce.
In 2008, investors fled to the safety of gold as Lehman Brothers collapsed, banks were nationalised and billions were spent on saving the global financial system. In their rush for a haven, investors pushed the price up 10.8 per cent in a day.
How to read the chart: The numbers along the bottom of the chart show the percentage probability of a rise or fall in that week of the year. Green indicates a likely rise and red indicates a likely fall.
Weeks that have an arrow as well also show greater consistency with fewer consecutive losses.
The 3rd and 4th week of September are particularly strong and consistent each year, with a 73% and 62% chance respectively of a rise.