The gold miners’ stocks are heading into their winter rally, when strong seasonal tailwinds help boost their advances. This is especially pronounced when gold stocks’ primary drivers of sentiment, technicals, and fundamentals are bullish, which is certainly true today. This sector is nearing a psychological tipping point of surging popularity, making secular breakouts, and earning record profits fueled by these record gold prices.
Seasonality is the tendency for prices to exhibit recurring patterns at certain times during the calendar year. While seasonality doesn’t drive price action, it quantifies annually-repeating behaviors driven by sentiment, technicals, and fundamentals. We humans are creatures of habit and herd, which naturally colors our trading decisions. The calendar year’s passage affects the timing and intensity of buying and selling.
Gold stocks display strong seasonality because their price action amplifies that of their dominant primary driver, gold. Gold’s seasonality generally isn’t driven by supply fluctuations like grown commodities see, as its mined supply remains relatively steady year-round. Instead gold’s major seasonality is demand-driven, with global investment demand varying considerably depending on the time in the calendar year.
This gold seasonality is fueled by well-known income-cycle and cultural drivers of outsized gold demand from around the world. Gold’s biggest seasonal surge of all is just getting underway heading into winter. As the Indian-wedding-season gold-jewelry buying that normally drives this metal’s big autumn rally winds down, the Western holiday season ramps up. The holiday spirit puts everyone in the mood to spend money.
Men splurge on vast amounts of gold jewelry for Christmas gifts for their wives, girlfriends, and daughters. The holidays are also a major engagement season, with Christmas Eve and New Year’s Eve being two of the biggest proposal nights of the year. Something like a third to half of the entire annual sales of many jewelry retailers come in November and December! And jewelry historically dominates overall gold demand.
The World Gold Council closely tracks global gold supply and demand, publishing the latest data each quarter. During the last five calendar years, jewelry demand averaged 42% of overall total world gold demand. That is much larger than investment demand, which averaged 26% during that same 2019-to-2023 span. In the WGC’s latest 2024 data current to Q3, jewelry demand is tracking a similar 40% year-to-date.
The usual frenzied Western jewelry buying heading into Christmas shifts to pure investment demand after year-end. That’s when Western investors figure out how much surplus income they earned during the prior year after bonuses and taxes. Some of this is plowed into gold in January, driving it higher. Finally gold’s big winter rally climaxes in late February on major Chinese New Year gold buying flaring up in Asia.
So during its bull-market years, gold has usually tended to enjoy powerful winter rallies driven by these sequential episodes of outsized demand. Naturally the gold stocks follow gold higher, amplifying its gains due to their excellent profits leverage to the gold price. Today gold stocks are now once again early on in gold’s strongest seasonal rally of the year, driven by this annually-recurring robust winter gold demand.
Since it is gold’s own demand-driven seasonality that fuels gold stocks’ seasonality, that’s logically the best place to start to understand what’s likely coming. This old research thread focuses on modern bull-market seasonality, as bull and bear price action are quite different. Gold enjoyed an epic 638.2% bull run from April 2001 to August 2011, fueling gold stocks skyrocketing 1,664.4% per their leading HUI index then!...
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