Already in the midst of an impressive bounce off support that is now about six weeks old, gold exchange traded funds such as the SPDR Gold Shares (NYSEArca: GLD) and the ETFS Physical Gold Shares (NYSEArca: SGOL) could get the benefit of some favorable seasonal trends.
History shows the next several months are a good time in which to own bullion, with the long gold seasonal trade proving particularly potent in recent years.
From July 12 through October 9 “gold bullion has gained an average of 3.63 per cent during the past 29 periods, outperforming the S&P 500 Index by 4.98 per cent. The trade has been particularly profitable in recent history, gaining in 14 of the past 17 periods for an average return of 5.44 per cent,” reports Don Vialoux for The Globe and Mail.
In the run up to the start of this favorable seasonality, GLD gained 7.6% from June 1 through July 11. Over that time, the world’s largest gold ETF added over $649 million in new assets. [Investors Flock Back to Gold ETFs]
As the aforementioned data indicate, no seasonal trend is a 100% lock, but it is hard to deny the trade has worked. Even in 2013, a brutal year for gold and gold ETFs, GLD managed a 1.6% gain over that period, though that was a far cry from the 12.1% gained in the same period in 2012. [A Pleasant Surprise From Gold ETFs]
The arrival of gold’s favorable seasonality comes as some market participants remain doubtful bullion can generate further upside.