Kar 83% verjetnost, da bo zlato v marcu še naprej padalo!
2018 was an epic year for the gold market. After crashing nearly twelve percent lower than its opening price in January, the price of the yellow metal rallied all the way back up to close out the year just one and a half percent down.
In that year, we also learned about the secret dealings in gold reserves from a raft of major countries, all around the world. In April 2018, Turkey requested that 220 tonnes of their gold be pulled out of the US Federal Reserve. Hungary, Germany, the Netherlands among others, all made similar requests.
However, after a solid start to 2019, trouble may be brewing in the gold market this month. Let's look at the seasonal pattern for this hot commodity and some possible ways traders can take advantage.
Gold's Seasonal Biases
Did you know that over the past five years, the month of January has been positive one hundred percent of the time?
Percentage of monthly chart positive closes 2014 - 2018 SPDR Gold Shares ETF
The above bar chart simply shows the percentage of months during which Gold closed higher than where it opened from the year 2014 - 2018. The market data is from the SPDR Gold Shares ETF, a common route for investment for hedge funds and institutions alike. It is the largest physically backed gold exchange traded fund (ETF) in the world and can give traders an edge into the future direction of the overall gold market.
You may have noticed the month of March in the bar chart above. It has been the worst performing month for the past five years with only a seventeen percent chance of closing higher than where it started at the beginning of the month. That translates into an eighty-three percent chance of gold ending lower in March.
Of course, five years is a very short period of time to work with. However, if we start to see a pattern develop over the past ten and fifteen years then we know there is something fundamentally important about the month of March. Let's have a look!
Percentage of monthly chart positive closes 2009 -2018 SPDR Gold Shares ETF
Interestingly, over the last ten years, March is still the weakest performing month of the year. Coincidence? It could be. But, it could also be an edge in the market. If it is, it's important to remember that it is just a statistical bias, or edge - it is not a certainty (nothing ever is).
Therefore, it is important to use this in combination with other technical, or fundamental, tools to build a broader picture, or case, on any patterns the market gives out.
Why does gold show seasonal tendencies?
Many markets show seasonal biases. However, it is the commodity markets and commodity currencies that show stronger seasonal tendencies than others. This is largely due to recurring supply and demand patterns. For example, in the winter the Western world uses more oil thereby affecting demand. In summer, the Western world uses more air conditioning, thereby affecting the demand for natural gas.
In the instance of gold, the seasonal pattern shows that December to February are the best performing months for the metal. This is largely down to the positioning of central banks and institutions as they rebuild their portfolio, or reserves, for the rest of the year. In the bar charts above you may have also noticed a strong seasonal bias for gold to rise in August. During this period of time, there are many religious festivals that involve the buying of gold.
Sometimes, we may not know the reasons why a market shows seasonal tendencies and will only have the statistical bias to work with.
How to trade gold with Admiral Markets
Let's look at the most recent chart of the popular, and commonly traded, Gold Spot CFD which tracks the gold spot vs US dollar exchange rate:
Source: Admiral Markets MT5 Supreme Edition, Gold, Monthly - Data range: from July 1, 2010, to March 4, 2019, accessed on March 4, 2019, at 4:30 pm GMT. - Please note: Past performance is not a reliable indicator of future results.
In the chart above, we can see that the gold market is contained in a trading range known as a consolidation or wedge formation. A resistance line forms on new price highs that keep getting lower. A support line forms on new price lows that keep getting higher. Both are marked by the black diagonal lines on the chart.
Traders will typically trade off these levels, respecting the containment of price within the consolidation. That is, at least until the market breaks out in a directional manner.
In this instance, the gold market stayed within its range and rejected the resistance line of the consolidation pattern. Interestingly, the subsequent decline coincided very near the beginning of the month March, which we already know is statistically a historically weak month.
A trader could have shorted, or sold, the market as it closed below the twenty period moving average, as shown by the blue line in the chart below:
Source: Admiral Markets MT5 Supreme Edition, Gold, Daily - Data range: from October 5, 2018, to March 4, 2019, accessed on March 4, 2019, at 4:40 pm GMT. - Please note: Past performance is not a reliable indicator of future results.
Entering on the close of the bar which closed below the moving average, would have resulted in an entry price of $1,313 on February 28. A stop loss could have been at the high of the entry bar at $1,327.
Trading at the lowest lot value for gold, 0.1 lots, then if the entry price was triggered and then hit the stop loss, the trader would have lost $140. In this instance, the stop loss was not hit. If the trader held on to the previous low of $1,302, on February 14, it would have resulted in an approximate profit of $110 reached on the next day, March 1.
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