The Most Profitable Months to Trade Gold

Gold trading has quickly become one of the most popular ways to make a play on the global economy and developing trends. Though the precious metal is often used as a part of a long-term strategy to battle inflation and store value, its prevalence as a trading instrument has surged in recent years. Many traders now use gold to make speculative bets on the economy as the metal has become quite volatile concerning news around the world [see also How to Play Schiff’s $5,000 Gold Prediction].

Finding the most profitable times to trade gold is entirely subjective; after all, there are a number of different strategies that can be utilized. But there are certainly months in which gold has been historically active, making them a prime target for traders to slice and dice the asset in whichever way the may choose. As far as bear months are concerned, October appears to be the biggest standout, as gold tends to dip in price as Autumn begins. Another weak period falls in June, where gold has historically trended downward and remained relatively flat through the end of August. Also note that the end of December and very beginning of January is typically where gold finds its bottom.

Bull months, on the other hand, are most evident in September and November. Both of these months have hosted gold’s biggest rallies in the past 15 years. Mid-January through February also see steady gains for this hard asset. What is perhaps most impressive about this chart is that overall, gold has trended straight up for the past 15 years (and more). Though there have been blips along the way, gold’s price seems to increase with each coming year. The following chart is courtesy of Signal Financial Group [for more gold news and updates subscribe to our free newsletter].

As always, historical performance is not indicative of future results, and 2012 has proven that to us, as gold has had a hard time finding its footing. The metal stuck to its historical pattern, topping out in February and dipping after, but it appears as if the metal may sink longer than its historical average dictates. With euro fears re-igniting on a weekly basis and uncertainty surrounding the Fed and their next move, gold seems to have lost its way. For those of you who buy in to the chart above, we may be nearing a perfect time to purchase gold, as the end of August seems to be a nice low before a strong rally [see also Why Buffett is Dead Wrong on Gold].

How to Play

While futures contracts are always a good option, one of the most liquid and versatile investments out there lies in the SPDR Gold Trust (GLD). This ETF, which has over $63 billion in assets and trades an average of 7.8 million times per day. Better yet, GLD has an extremely active options market that will allow for traders to make bets on where they feel GLD is headed. It would seem that calls for September/October could yield positive results if timed correctly. Note that this fund holds physical gold bullion, not futures, though it will still accurately reflect spot prices. Some investors feel that this ETF is a paper asset and that it does not actually hold gold, but for traders this fact is almost entirely irrelevant as your holding period will be measured in hours and days rather than months or years. No matter what is behind GLD, there is no denying that it is one of the most popular trading instruments available on the commodities market.

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Disclosure: No positions at time of writing.

This entry was posted in Commodity ETFs, Commodity Futures, Gold, Precious Metals and tagged . Bookmark the permalink.

Commodity HQ is not an investment advisor, and any content published by Commodity HQ does not constitute individual investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities or investment assets. Read the full disclaimer here.

9 Responses to “The Most Profitable Months to Trade Gold”

  1. [...] Equity markets took investors for a roller-coaster ride last week as ongoing threats from the eurozone collided with mixed economic data releases on the homefront. Rising yields on government bonds overseas prompted ECB president Mario Draghi to make a statement reassuring investors that lawmakers would do whatever it takes to ensure the financial stability, and unity, of the debt burdened currency bloc. At home, investors were hit with mixed corporate performance results and worse-than-expected readings from the housing market. To top it off however, U.S. GDP results on Friday helped to restore confidence and bolster major indexes into green territory for the week [see also The Most Profitable Months To Trade Gold]. [...]

  2. [...] Thus far in 2012, gold is up just over 3%, but is looking to add to that tally in the coming weeks. For now, investors favorite means of obtaining gold exposure is the ultra-popular SPDR Gold Trust (GLD), though there are a number of other products out there. Still, others prefer physical bullion and the safety it provides against market imperfections. Either way one thing is certain, if central banks around the world continue to print money at will, the odds of gold making another historic run are very good [see also The Most Profitable Months to Trade Gold]. [...]

  3. [...] Currency, while it is a medium of exchange, and a unit of account is not a store of value. It only derives its value by arbitrary fiat – government decree and hence the term “fiat currency”. Paper banknotes represent money but they are not money. They are simply promissory notes whose long-term “value” or purchasing power depends entirely on the fiscal and monetary discipline of the government that issued them [see also The Most Profitable Months to Trade Gold]. [...]

  4. [...] Currency, while it is a medium of exchange, and a unit of account is not a store of value. It only derives its value by arbitrary fiat – government decree and hence the term “fiat currency”. Paper banknotes represent money but they are not money. They are simply promissory notes whose long-term “value” or purchasing power depends entirely on the fiscal and monetary discipline of the government that issued them [see also The Most Profitable Months to Trade Gold]. [...]

  5. [...] These blogs hone in on a particular sector or asset [see also The Most Profitable Months to Trade Gold]. [...]

  6. [...] Gold Trendpilot ETN (TBAR): This fund takes a unique approach that switches between investing in gold and 3 month T-bills based on a historical moving average. When the fund is invested in gold it charges 100 basis points, but that drops to 50 when it switches over to T-bills. The fund debuted in early 2011 and has lost more than 7.4% in the trailing year [see also The Most Profitable Months to Trade Gold]. [...]

  7. [...] some steam, the precious metal suffered a rough couple of weeks. October has historically been the worst month for gold over the last 15 years, and this year’s loss of nearly 3.5% for the four week period fell right [...]

  8. [...] These blogs hone in on a particular sector or asset [see also The Most Profitable Months to Trade Gold]. [...]

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