Gold: History Solves the Mystery (Part 4)

By December 13, 2017 Uncategorized

If you were to invest in gold now, historically speaking, you have a 78% chance of making money with just a 17% likelihood of taking a loss in Q1 of 2018.

Years ago, I wrote a report called History Solves the Mystery where I discussed the seasonality and historical performance of gold. In the follow up to that report, History Solves the Mystery Part 2 written in late 2009, I referenced gold’s tendency to rally in the first quarter of the year, often making its Q1 high in what I called “the magical month of March”. Finally, in 2015 I wrote part 3 of the series updating my theory through 2015. Now I will update my theory tracking performance through 2017 and looking to 2018.

To begin, let’s look at 2015-2017. Using both annual and monthly charts and data on Kitco.com I have compiled the following results:

In 2015 gold rallied from approximately $1,170 an ounce to $1,300 in January before finishing the quarter at approximately $1,180. We did indeed see a significant rally in Q1, but March was not very magical in 2015.

In 2016 gold started the year at around $1,075 an ounce, hitting $1,275 an ounce in March and ending the quarter at $1,235. Rally? Check. High in March? Check.

In 2017, gold began the year at $1,150, rallied, hit a high of approximately $1,255 in February and in March, finishing the quarter strong at $1, 245. Again, we had a Q1 rally with a high in the month of March.

As you can see, my theory about a Q1 rally holds and March is still pretty magical. However, this is not news. For the past 8 years, I have been pointing out these historic trends. While we must remember that past performance is not necessarily indicative of future results, let’s look at a yearly chart for all years since 2000.

In the spirit of simplicity, I have chosen to update this report with simple percentages. Utilizing the historical charts from Kitco.com we can observe that since 2000, the gold market has rallied in 14 of the 18 years or 78% of the time. In the 4 years that gold did not rally, the market declined in just 3 years or 17% of the time and trended sideways for 1 year or just 5% of the time.

That means that if you were to invest in gold now, historically speaking, you have a 78% chance of making money with just a 17% likelihood of taking a loss in Q1. If you factor in the sideways year, you have an 83% chance that you will be the same or better off come March 2018.

What does that mean? That means that with gold prices low this December, you have a phenomenal opportunity to make money in the next 90-120 days. Short-term investors can look for quick profits while long-term investors who have been waiting for the “right time” to buy should wait no longer.

If you are one of the unfortunate investors who bought gold at previous highs, this is the ideal time to reposition and dollar cost average in order to take advantage of the probable rallies in Q1 and beyond.

 

Chris Dickens

Author Chris Dickens

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