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Tax Time Can Take a Bite Out Of Gold & Stocks

One of today’s few bright spots was gold, up better than $20 per ounce. Gold is now trading right around the same level it was at just before Election Day last year. But, before jumping onto the bullish gold bandwagon consider the following excerpted from the Commodity Trader’s Almanac

“Gold has a tendency to continue the seasonal decline that often begins in January, leaving April vulnerable to price declines. April tends to see tax related selling pressure on gold prices along with other financial markets, specifically the U.S. stock markets and more predominantly in the technology sector as represented by the NASDAQ 100. It seems that some investors raise capital to pay the IRS by liquidating portions of assets such as gold and stocks (see Stock Traders Almanac 2017, page 38). 

Generally speaking, April is also a weak month from a demand perspective. The two forces of increased sales (supply) and no major demand cause the downside price pressure on gold during April.” 

In the chart above, gold’s continuously-linked front month contract is plotted along with its 1-year seasonal price pattern since 1975. A yellow box highlights gold’s seasonal tendency to decline in mid-April right around tax deadline day. A better gold buying opportunity could be just ahead.