Seasonal Trends For 8 Metals Including Gold And Silver

by: Fred Piard

In my search for probabilistic gains (methodology here), I have already written articles about seasonal strategies on stock indexes (sample here). In this one I would like to show that seasons also have an influence on metals.

The following table summarizes the historical monthly trends for the price of Futures contracts on 8 metals. For every month and every metal, a number represents the magnitude of the trend. For example, 1 means than the monthly average return is roughly between 1% and 2%; -3 means that it is between -3% and -4%. An empty cell means no significant trend (between -1% and 1% on average).

The "Y" column gives the number of years in historical data, which is not the same for all metals. The "ETF" column gives the most liquid ETF on each metal.

Metal Y ETF Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Gold 40 GLD 1 1 1 2 1 1
Silver 37 SLV 2 1 -2 2 3 -1 1
Plat. 32 PPLT 2 1 -1 2 -1 1 1
Pall. 30 PALL 5 -1 -1
Copper 37 JJC 2 3 -2 -1 2 2 1
Alu. 17 JJU 2 -1 -1 -2 -1 -1 1 1
Lead 13 LD 2 3 -2 -2 4 1 3
Nickel 15 JJN 4 3 -3 -1 2 3

You may draw as many conclusions and hypotheses as you wish from this table; I will just focus on what appears the most important to me:
- There is a bullish seasonal trend on metals from November to February.
- Gold has no calendar month below -1% on average for 40 years.
- The highest historical probability of being whipsawed is in platinum, silver and copper.
- The highest historical gain of an hypothetic seasonal swing trade is in lead and nickel. Caution: they're also the metals with the shortest price history.

I would like to insist on 2 important facts:
- It is not a strategy description: the moves against the historical trend may be strong in metals.
- The numbers do not have the probabilistic value of a backtest: the data availability period is different from a metal to another.

However, these historical facts might be used as a filter or a confirmation to improve one's timing. For example, I would avoid selling short palladium and nickel in January, or buying lead and aluminum in March, except when all other indicators strongly confirm the trade. On the other hand, a weak technical "buy" signal on palladium in January would be reinforced by the seasonal trend. As a long term investor in gold and silver, I can also confirm that it's usually better to accumulate after the summer.

Disclosure: I am long CEF, GTU, OTC:ZSILF.

Additional disclosure: I am long physical metal funds in gold and silver.