The day, 14^th February, is celebrated around the world as Valentine’s Day. This day marks a landmark in a relationship, be it between couples or other forms. Exchanging of gifts, in the form of roses amongst others is the theme of the day with individuals showering their love for each other. But a question arises in my mind-Why do we need a day to celebrate this wonderful feeling called love? There is no particular season for love as long as the two individuals in question coin everyday as a Valentine Day. Some thoughts for you to ponder upon!

Seasonality is prevalent in a wide variety of variables. In business, sales, production, inventory, man hours and discounts can be at least partially predicted by seasonal affects. Gold is no different. In different months price swings occur somewhat predictably year after year. An investor may ask-what causes this, to what magnitude does it occur and most important-how can we profit? As we all know, the popular notion of economics affects the price of all things tangible and intangible-supply and demand.

Between late April and early July, gold has been very flat over the last 11 years. These slow months are known as the summer doldrums. Who knows what the actual reason is, but it could simply correspond with traders/investors taking vacation and demand slowing for that reason. A key part may also be simply the perception of the summer doldrums, investors expect things to be quiet around this time of the year and therefore refrain from taking large positions, which results in the market being more subdued.

The historic August/September bull period is a little easier to explain. This period coincides with the end of harvest in Asia/India. Agricultural producers and farmers in these relatively poor nations aren’t likely to deposit their profits in some local banks. Instead they traditionally store their wealth in gold and with huge number of producers doing the same, the gold prices enhance. India is also the largest importer of newly mined gold in the world. There are various cultural reasons behind this, but suffice to say gold holds an important place in the Indian culture, especially in the wedding season which commences in October. Jewelers in the developed world also contribute to the September rush. In order to have sufficient quantities of jewelry manufactured and ready for delivery in November prior to the Christmas boom, jewelers traditionally acquire the requisite gold in August/September.

All of the above factors contribute to the seasonal variation observed and should be included as a facet when formulating a trading strategy. Historically, gold has followed a definite seasonal trend. But they are not hard and fast rule and can be flipped upside down in any given year. As for me, I will run away to the nearest gift shop to buy Valentine’s Day gifts for my better half as it comes once in a year!

Note: The blog is just an expression of the author’s opinion and cannot be deemed responsible for any losses incurred.