The Seasonality of Gold Prices: 'A Potential Strategic Investment Opportunity'

Source: John Newell 06/26/2024

John Newell of RSD Discovery Group believes that gold, often regarded as a safe haven asset, exhibits notable seasonal patterns that savvy investors can leverage to optimize their portfolios. He shares the chart from Seasonax Ltd. to show that gold prices tend to hit a low in early July and then rise in August and September. While gold can have periodic corrections, Newell believes that the rise often continues until year-end. Newell opines that understanding these patterns and their underlying causes can provide investors with strategic insights for timing their investments in gold and gold-related equities and shares two companies investors may want to look into.Seasonal Patterns in Gold Prices

Early July Lows and Prices that Generally Rise for the Balance of the Year

Below is my gold timing chart, which I have in other commodities also but do not share publicly.

Following the seasonal low in early July, gold prices typically start to rise for the balance of the year. The Seasonax Ltd. chart suggests that gold typically reaches a low in early July. Several factors contribute to this seasonal low and subsequent rise:

Agricultural Influence in Asia

• Indian Farmers: Post-harvest, Indian farmers often purchase gold with their surplus savings. This practice significantly influences gold demand, as India is one of the largest consumers of gold.
• Chinese Farmers: Like Indian farmers, Chinese agricultural workers buy gold after a successful harvest. This trend is observed in other Far Eastern countries as well.

Wedding Season

• In India, the wedding season, which usually begins in late summer, drives significant gold purchases. Gold jewelry is a traditional and essential part of wedding ceremonies, boosting demand.

Elections in the United States

• Elections in the United States can see lower or stable interest rates, which can sustain stable precious metal prices.

Western Holidays and Engagements

• The demand for gold continues to pick up in the Western markets as consumers prepare for the holiday season, particularly around Christmas. This period is also known for high engagement rates, further increasing gold purchases.

Chinese New Year

• Gold gifts are highly prized during the Chinese New Year, leading to a surge in demand after the Western holiday season.

Spring Optimism

• Further strength following St. Valentine’s Day is generally driven by a feeling of optimism. As days grow longer and economic activities pick up, there is general optimism in the markets, contributing to a further rally in gold prices.

Factors Beyond Seasonality

While seasonality plays a significant role, other factors also influence gold prices and the performance of precious metal shares:

Exploration Success

• Summer can be a crucial time for junior exploration companies. The hard scientific work done during the winter off-season often culminates in exploration success when the snow melts, and active programs can result in discovery. This can be rewarding for investors who have positioned themselves in companies exploring for strategic metals. Positive news from successful explorations can drive up stock prices in the sector.

Two companies that investors can look at of potential strength due to seasonality are McEwen Mining Inc. (MUX:TSX; MUX:NYSE) and Renegade Gold Inc. (RAGE:TSX; TGLDF:OTC; 070:FRA), which we have previously researched, and both have corrected from the April Highs, giving investors another chance to get a position in these companies.

McEwen Mining Inc. (MUX:TSX; MUX:NYSE )

McEwen Mining is a diversified gold and silver producer with operating mines in Nevada, Canada, Mexico, and Argentina. The company also has a significant stake in McEwen Copper Inc., which focuses on the Los Azules copper project in Argentina.

This project is not just an investment in a mining operation; it’s an investment in the future of copper, a critical component of the global shift towards sustainable energy and technology.

With its innovative approach to mining, significant growth potential, and the strategic geopolitical context of Argentina, McEwen Mining represents a unique and attractive opportunity for forward-thinking investors.

The expected cyclical low in gold prices in July presents a strategic entry point for investors to capitalize on the potential upswing in McEwen Mining’s stock price, as gold prices typically rise in the latter half of the year.

Renegade Gold Inc. (RAGE:TSX; TGLDF:OTC; 070:FRA)

Renegade Gold Corp is on a transformative journey to become an exploration leader in the historic and gold-rich Red Lake District of Ontario. With a market capitalization of ~$14.5 million and a strategic merger with Trillium and Pacton, Renegade holds the largest land holdings in the district and employs advanced exploration techniques.

The company’s advanced Newman Todd Deposit has shown high-grade gold mineralization extending to over 750 meters. Led by experienced industry veterans Dale Ginn and Nav Dhaliwal, Renegade is well-positioned for significant growth.

The seasonal low in gold prices in July offers an attractive entry point for investors to benefit from potential exploration success and subsequent stock price appreciation as gold prices typically rise through the late summer and fall.

Technical indicators:

A chart of the HUI Gold Bugs Index shows a high level of consolidation, suggesting that the sector could act as a springboard to higher prices for both precious and base metals. Investors can use these technical indicators alongside seasonal patterns to make better-informed decisions.

Conclusion

Investing in gold and gold equities requires a multifaceted approach, considering both seasonal trends and other influential factors. The historical pattern of gold hitting a low in early July and then rising significantly through late summer and fall provides a strategic window for investors. Coupled with the impact of cultural practices, wedding seasons, and key holidays, these insights can help in timing gold investments effectively. Additionally, monitoring exploration activities and technical indicators like the HUI Gold Bugs Index can further enhance investment strategies, making the summer and fall particularly rewarding for those who are well-prepared.

By understanding and leveraging the seasonality of gold prices, investors can optimize their portfolios and capitalize on the predictable trends in the gold market. However, these are by no means all the factors governing the price of precious metals and precious metal shares.

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Important Disclosures:

1. Renegade Gold Inc. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
2. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Renegade Gold Inc.
3. John Newell: I, or members of my immediate household or family, own securities of: Renegade Gold Inc. I determined which companies would be included in this article based on my research and understanding of the sector.
4. Statements and opinions expressed are the opinions of the author and not of Streetwise Reports, Street Smart, or their officers. The author is wholly responsible for the accuracy of the statements. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Any disclosures from the author can be found below. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
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John Newell Disclaimer

As always it is important to note that investing in precious metals like silver carries risks, and market conditions can change violently with shock and awe tactics, that we have seen over the past 20 years. Before making any investment decisions, it’s advisable consult with a financial advisor if needed. Also the practice of conducting thorough research and to consider your investment goals and risk tolerance.

( Companies Mentioned: MUX:TSX; MUX:NYSE , RAGE; TSX: TGLDF; OTC: 070:FSE, )