If you’ve been around the gold sector for a little while you’ve no doubt come across talk of “gold seasonality”.
Gold seasonality generally refers to the northern hemisphere mid summer lull in precious metals markets – which often seems to match the share market lull at this time of year. This is where the old sharemarket adage “Sell in May and go away” comes from. Likewise it seems to be the case with Bullion Dealing Desks. Perhaps because the big money players that drive the futures markets are on holiday (like their share-trading brethren).
On top of this it is the Indian monsoon season, so the demand from Indian gold consumers typically does the opposite of the weather and “dries up” significantly over the mid summer months.
The other aspect to gold seasonality is that buying momentum then generally returns in the North Hemisphere Autumn, coinciding with the Indian Diwali festival which is in October/November depending on the lunar cycle.
The local gold price is a function of the gold price in US dollars and the NZ dollar/US dollar Forex rate, so this USD/NZD cross rate could throw this pattern out in NZ.
But does it?
Perhaps the simplest way to check is visually. So we’ve put together a simple chart.
We’ve placed arrows showing the price movement from the July/August period through to the end of the year each year for the past 10 years. Greens arrows indicate the price has gained from July/August to December. Red arrows it has fallen.
The chart clearly shows that in 7 of the past 9 years the NZ dollar gold price has gone up from the July/August period through to December. With the only falls being in 2006 and last year. Even 2006 then saw a pretty hefty gain over the following 2 years.
So after what is getting close to a 3 year correction in gold, and an unusual fall in the July/August to December period last year, could this make now a pretty good buying zone?
We’d hazard a guess to say that it could be. And so far so good with the price edging quietly higher since June.
So does this same phenomenon exist for NZ dollar silver? Yes but not quite as strongly in recent history as for gold.
We’ve plotted the same 10 year chart for NZ dollar silver below.
You can see that in 6 of the last 9 years NZ dollar silver has moved higher from July to December versus golds 7 out of 9.
Interestingly last year was the only year that silver had in common with gold in terms of falling over this period. The other 2 years where silver fell in the later part of the year, were 2008 (when silver fell more sharply and recovered slower than gold during the financial crisis) and 2011.
So after having fallen for over 3 years, NZ dollar silver looks to be doing its best to eek out a bottom not much below current levels.
On top of this recent history in terms of silver seasonality shows the odds favour silver in NZ dollars rising between July and December.
Again like gold – a likely good buying zone exists here and now. Particularly if the NZD continues to weaken further or at least remain below its recent highs.
If you’d like a quote for gold or silver head over to our order page. Or simply give us a call on 0800 888 465 (+64 9 281 3898 outside NZ). We’re always happy to have a chat about precious metals markets.