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Gold: March Comes In Like a Lion

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Seasonal pattern suggests accelerated decline this month.

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Gold prices have soared by $304 per ounce, or a whopping 43% between late October, 2008 and late February, 2009, before pulling back a little recently. The catalyst for this kind of move in gold is typically concerns about inflation. However, this time it's been a stampede out of US equities and into anything that might offer some element of safety - including US Treasuries and our own US currency.

This frantic flight to perceived safety has resulted in gold prices and the US Dollar Index -which have historically been inversely correlated to one another - being 67% positively correlated since January. However, a 31-year seasonal pattern suggests that the mid-February decline in gold prices is likely to continue, and accelerate, in March.

The following is an excerpt from our March Global Seasonal Analysis report (access requires subscription), which displays and analyzes the latest seasonal patterns and trends for 17 different global financial markets including:

  • Global equity prices

  • Global benchmark interest rates

  • Global foreign exchange rates, and

  • Key commodity prices


Based on historical data going back to the 1950s.

Global Seasonal Analysis, March 2009
Gold Prices


The red bar and highlights on the chart below identifies March as being the seasonally weakest month for gold prices (London PM gold fixing) since 1977, and the last of a 2-month period of acute seasonal weakness that also includes the third weakest month during this period. The blue highlights point out that a modest seasonal recovery then follows in April and May.


Click to enlarge

Normally, a decline in gold prices indicates an abatement in inflationary pressures and concerns. This time, though, we think that, should this strong, 31-year bearish seasonal pattern in gold prices hold true again this year, it may be more indicative of at least a temporary unwinding of the flight-to-perceived-safety trade that has driven both gold prices and the US Dollar sharply higher thus far this year.

If we're correct, a continuation of February's decline in gold prices should coincide with a decline in both the greenback and in US Treasury prices, and a rebound in the US stock market.

No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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