Saturday, October 30, 2010

Gold Seasonality

Let us pass on the Dominant Theme investing observations again this week and take a quick look at the current precious metals complex. The seasonality for gold and the gold stocks is from December 2000 to December 2012 – give or take a few quarters. I gather most investors have recognised the secular bull in the precious metals complex and know that to trade in and out of a rising sector simply means to sell high and buy back at higher prices. Or, you can sell and never get back on board.

Our chart is a daily of the TSX listed BMO Jr. gold ETF (ZJG) plotted above the big cap Barreck Gold (ABX). Last Friday the ZJG posted a new 52-week and all-time high. Note the lagging Barrick. Most interesting is the little confirmation signals that flash from the small cap ZJG such as the short term sell and buy setup through March and July. We can apply the same test on the longer term weekly and monthly plots to get a sell-and-buy setup on the longer secular advance. My best guess would be that sometime in 2011 or 2012 we get a new all-time in Barrick and a swing failure in the ZJG – but that is another day and so for the moment let us party.

No comments: