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Seasonality Could Shine on Gold ETFs


Already in the midst of an impressive bounce off support that is now about six weeks old, gold exchange traded funds such as the SPDR Gold Shares (GLD) and the ETFS Physical Gold Shares (SGOL) could get the benefit of some favorable seasonal trends.

History shows the next several months are a good time in which to own bullion, with the long gold seasonal trade proving particularly potent in recent years.

From July 12 through October 9 “gold bullion has gained an average of 3.63 per cent during the past 29 periods, outperforming the S&P 500 Index by 4.98 per cent. The trade has been particularly profitable in recent history, gaining in 14 of the past 17 periods for an average return of 5.44 per cent,” reports Don Vialoux for The Globe and Mail.

In the run up to the start of this favorable seasonality, GLD gained 7.6% from June 1 through July 11. Over that time, the world’s largest gold ETF added over $649 million in new assets. [Investors Flock Back to Gold ETFs]

As the aforementioned data indicate, no seasonal trend is a 100% lock, but it is hard to deny the trade has worked. Even in 2013, a brutal year for gold and gold ETFs, GLD managed a 1.6% gain over that period, though that was a far cry from the 12.1% gained in the same period in 2012. [A Pleasant Surprise From Gold ETFs]

The arrival of gold’s favorable seasonality comes as some market participants remain doubtful bullion can generate further upside.

Goldman Sachs, which has been consistently bearish on the yellow metal this year, said gold prices will fall as investors gain confidence in the economic recovery, assuming inflation is subdued, reports Glenys Sim for Bloomberg.

“The net-long position in gold rose to 144,272 futures and options contracts in the week to July 8, U.S. Commodity Futures Trading Commission data show. That’s the highest since November 2012,” Sim reported for Bloomberg.

Gold could still be an attractive hedge with equities in some parts of the developed world looking richly valued. GLD is up 9.1% this year, a gain that has been buoyed by geopolitical concerns, including tensions in Eastern Europe and Iraq. Gold ETFs gained 1.7% last week on elevated fears regarding the health of Portugal’s banking system.

SPDR Gold Shares


Tom Lydon’s clients own shares of GLD.