Although the price of gold goes up and down throughout the year, driven by a series of geopolitical and economic factors, economists and analysts establish guidelines that, with greater or greater accuracy, are repeated every year.
In the raw materials or ‘commodities’ market, it is common to detect a series of seasonal patterns that are repeated from year to year. The repetition of these patterns may be due to factors related to supply or demand.
In the case of agricultural raw materials, seasonality is determined by the supply , which may be reduced by certain circumstances related to the weather or other factors, causing price increases at certain times of the year.
Geographic Causes
But seasonal trends in investment gold are driven more by fluctuations in demand . There are a number of factors related to the demand for this precious metal in certain countries around the world that cause increases in the price of the metal on approximately the same dates each year.
One of these countries is India , the world’s second largest consumer of gold and the largest global importer, with a figure that ranges between 700 and 900 tons of the precious metal per year.
The Diwali festivities , in the middle of November, or the wedding season , towards the end of the year, are moments of special increase in gold consumption, which account for a significant percentage of annual transactions. It is considered a good omen to give gold pieces or jewelry, a metal that has a special meaning in the culture of this country.
In China , the same thing happens with the arrival of the Lunar New Year , whose celebrations take place every year between the last week of January and the first week of February. This is a time of growth in demand for gold, as is the case in some Western countries such as Germany at Christmas time.
Supply-Demand
These specific moments of increased demand cause the price of gold to rise, since in this industry it is not possible to increase the supply of metal at specific moments of peak demand.
The production of each one of the mines is limited and the volume of gold they contain can only be extracted at a certain speed, so the useful life of the exploitations is calculated for a series of years.
Trying to increase that rate at certain times would require a significant capital investment, as well as a mine redesign that would take several years to complete, making it pointless.
Therefore, this supply-demand equation causes the price of gold to tend to rise and fall each year on the same dates.
Historical Facts
As explained by the head of Investments of the Australian Perth Mint , Jordan Eliseo:
“Investors often wonder if there are certain periods of the year when, historically, gold tends to appreciate, while in others it tends to stagnate or fall . “
As can be seen in the upper graph, made by the Perth Mint itself, it is possible to notice certain annual trends. The graph shows the monthly average percentages of revaluation of the price of gold in dollars between the beginning of 1971 and January 2020.
The figures that are reflected in the bars are obtained by taking the figure of the total revaluation of gold in each of the months and dividing it by the number of months. For example, if gold has appreciated 100% between 1971 and 2020, it would have to be divided by the 50 months of January that have elapsed between them, obtaining 2%.
As can be seen in the graph, the revaluation of the price of gold in dollars is usually greater between November and the end of February , a period in which three of the four best monthly results of the year are usually recorded.
It is good to know this trend to make the right decisions about when and how much to invest in gold. But making it clear that these are only trends.
