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Gold and Silver Seasonality


Seasonality has turned positive for gold and silver.

Seasonality has turned positive for gold and silver. Let's turn to the technicals for a second opinion.

Gold Weekly

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There is a strong tendency for physical gold to put in a bottom in a June/July timeframe with an acceleration up starting in August/September, sometimes after a minor correction in August. The above chart also shows that buying gold close to the 50 day moving average is typically a winning action.

I spoke with Dave Meger, head metals trader at Alaron on Tuesday. Dave thinks "the summer lows in both gold and silver are likely in." This is not coming from someone who is perpetually bullish on metals. He was short gold headed into June.

$HUI Weekly

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Seasonality does not play as consistent a factor with the $HUI as does physical gold but there is a positive correlation. Note too that strong breaks of the 50MA are much more common than with physical gold. Nonetheless the $HUI appears to be putting in a year long consolidation and is poised to move up with gold and break out of its current channel.


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Goldcorp (GG), like the $HUI is in a consolidation pattern, and is poised to stage a breakout.

Silver Weekly

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Like gold, buying silver on the 50MA or with small breaks in the 50MA has proven to be a winning strategy. So has been buying the summer swoon.

CPI Adjusted Commodity Prices

Nick at Sharelynx Gold sent me a few charts last week on CPI adjusted commodities. For these charts he used John Williams' CPI ShadowStats data.

ShadowStats CPI Adjusted Gold

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ShadowStats CPI Adjusted Silver

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ShadowStats CPI Adjusted Crude

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ShadowStats CPI Adjusted Copper

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ShadowStats CPI Adjusted Dow

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The above charts are for perspective only. This is not an endorsement of ShadowStats per se as I tend to think ShadowStats overstates price inflation just as the government numbers understate price inflation. The difference of course is that the government errors are purposeful while I believe John Williams makes an honest attempt with ShadowStats.

Problems arise because prices are a poor way to measure inflation in the first place. Please see Inflation: What the heck is it? and Rampant Inflation from my blog for a detailed explanation why attempting to measure inflation by prices is a fool's game. Nonetheless alternative measures of the CPI can have their uses. They take a stab at showing us just how much we are being ripped off by government distortions, even if the numbers are useless when it comes to measuring asset bubbles.

Finally, I would be remiss if I failed to point out that should a massive credit crunch arise soon, there is a strong possibility that the baby is thrown out with the bathwater, and gold seasonal tendencies right along with it. It's going to happen sometime, whether this is the time or not, remains to be seen.
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