The Seasonality of Gold Trading
We have already analyzed gold as a safe haven for investors in case of turbulence on the world’s financial markets. But this precious metal has another important feature as well: seasonality. Binary options traders can make use of this opportunity, too. The autumn rally of gold is about to start. We are entering the strongest time of the year.
Historically, gold prices show recurring patterns during the year, they have enjoyed massive autumn rallies on average. The seasonality of gold is not driven by supply fluctuations like corn, for example. Metals are mined steadily all year. The fluctuation here is demand-driven, as demand for gold varies depending on the time within the year.
What Factors Influence the Demand for Gold?
The demand is fueled by the income-cycle and cultural drivers of several nations from around the world. Who are they exactly?
• Asian farmers reap harvests in late summer, and when they see how much income was generated, they save some part of that into gold.
• Wedding season in India is autumn. They believe that getting married during the autumn festivals, which are in October, will increase the likelihood of long and happy marriage. Indian parents buy their daughters 22-karat gold jewelry when they are getting married. This is not only a wedding present, the vast quantity of jewelry secures women’s financial independence within their husbands’ families. Gold demand in India is greater than that of the United States and Europe combined and most of this occurs in September prior to the wedding period.
• The Western holiday season increases the demand gold-jewelry, as gold is a traditional Christmas gift. A lot of people receive their 13th month salaries and annual bonuses before Christmas, so they can invest it into gold.
What is Likely Coming?
Gold is in a new bull market now. The latest big bull market of the precious metal ran from April 2001 to August 2011. The prices soared 638.2% higher in ten years. After a few weaker years, gold price is increasing again: between the end of May and early July 2016, it rocketed 12.3% higher. This was most probably due to the fact that investors were looking for a safe haven in the chaotic circumstances around Brexit. Speculators bet now on gold to towering record levels. The spot gold price is almost $1,350 per ounce at the time of writing this article, and resistance is between $1,355 and $1,375.
Binary options traders can play the autumn rally, but – as always – they need to analyze the market carefully, because seasonality is a tendency, that often works, not a sure thing.
If you want to widen your investment portfolio, you can also trade with binary options on gold miners’ stocks, as their prices follow gold prices.
You can trade on the silver market as well, because the price of the white metal closely follows gold. When gold is strong, traders buy silver, too. So the autumn gold rally is very bullish for silver. The same refers to other precious metals such as platinum and palladium, their prices are climbing as well.