How Do Seasonal Factors Affect the Price of Gold?
Although gold remains a bastion of stability and its prices are not subject to such dramatic collapses as other assets, seasonality affects it as well.
To better understand the principles of using gold as an investment asset, at Golden Way we decided to look into the peculiarities of gold pricing depending on seasonal factors. So, what influences the price of gold and how this can be used to benefit you as an investor.
First things first: how is gold price analytics done?
Until 1973, private trading of gold was forbidden in the United States (one of the largest gold markets in the world). But since then, statistics have accumulated enough data to identify the key factors affecting the price of gold, both on a country-by-country basis and more globally. In order to identify active seasonal factors, sociologists and analysts studied the price fluctuations over a period of almost 50 years. And here's what they found out.
Which months are successful for gold trading?
Annual observations have confirmed that gold has its seasonal peaks. And they occur in the period from September to January-February. Why is it exactly like that? It is enough to take into account the largest gold markets - China and India. What happens during this season in Asia?
- In India, from September to January is the wedding season. And for weddings in India, a truly immense amount of jewelry is given as gifts. Not to mention that even the most poor bride is usually just covered in gold on her wedding day. On the scale of a country with a population of several billion people, the need for gold is absolutely enormous.
- At the same time, another giant, China, is actively buying gold for the Chinese New Year celebrations from December to February.
As a result, autumn and winter are a truly golden time for traders and investors. But it's not just these months and reasons that matter.
What about the U.S. and Europe?
Unlike the Asian region, in the U.S., weddings peak in the spring and summer. That means the local market has a boost from March to July. Meanwhile, there is a whole bunch of key family holidays from November to January: Thanksgiving, Christmas, and New Year's Eve. And they are all characterized by an upswing in demand for gold, which is known to be a coveted gift.
And what are the growth rates?
Each of the annual phases of rising demand for gold involves different factors. For instance, during the highest demand period in the fall and winter, the price increase is about 6%. And the peak over the past 30 years was an increase of as much as 15%! At the same time, a drop in gold prices in the 30-year period was noted only in 2012.
Between March and July, the dynamics are much less expressed, but they exist.
How exactly do you use this to your advantage? We've talked before about why it's profitable to buy gold bars. And now you can not only choose the amount and form of gold you want to invest, but you can also plan for future trading opportunities of the yellow metal. If you want to sell gold in the coming years, pay attention to seasonal peaks, and plan your trades around that period.
And if you want to get even more useful information about gold as an investment, be sure to join us at Golden Way: we are ready to share with you unique insights, experience and knowledge in the field of gold investments.