Thursday December 01, 2016 18:17

Ten – Ten, the two critical numbers gold traders are looking at closely.

Since the presidential election was held on November 8, we have seen a dramatic decline in gold prices. Downside pressure continues to dominate precious metals pricing as a whole, resulting in gold prices now moving to a ten month low.

At the same time, when we consider the yearly range seen in gold prices, and look at gold’s overall performance of the year, we find that prices have gained roughly 10%. On January 1, of this year, gold was trading at roughly $1060 per ounce. Compare that to gold’s current pricing on December 1 at 1173, and gold is still trading above the lows that occurred at the onset of 2016.

Considering that gold prices at this year’s high resulted in a net gain of approximately 30%, and has now given back roughly 2/3 of that gain, gold prices have in fact seen a dramatic decline in pricing over this last month. So, the real question becomes whether or not gold pricing will find some price support and hold onto the 10% price gain from this year.

Historically, over the last few years, gold prices typically decline as we go into the conclusion of a calendar year. In 2014, for example, gold prices were trading at approximately 1180 per ounce in January. By March of that year, gold prices climbed to 1380 (the high of 2014), which was followed by a sharp decline, taking gold prices to 1135 in November of 2014. From November until December 2014, gold prices recovered modestly, with a closing price that year of 1164. The net result of 2014 was a dismal gain of under $20 per ounce.

In 2015, gold prices reached their yearly high in February at 1300 per ounce, but declined sharply throughout the rest of the year, reaching a yearly low in December, with a net loss of about $120 per ounce. Which brings us to our current calendar year. The lows found in January held and, to this date, is still the yearly low. What we can see is over the last three years there has been a seasonal tendency in gold to peak at some point during the first half of the year, and then to decline to lows by the end of that calendar year.

Granted, we are certainly living in different times. The most recent presidential election has flipped conventional investment wisdom on its head. Immediately following results of this presidential election, we saw gold prices rally $50 higher in a four-hour time span. The Dow Jones Industrial Average futures traded roughly 800 points lower in the same amount of time.  We also witnessed, what I believe is one of the greatest reversals we have seen this decade. The following day, equities began a rally to new record highs. Gold prices plunged, losing two thirds of their yearly gains.

So, although historically speaking, gold prices typically bottom in the final two months of the calendar year, or the first two months of the next year, we are not living in a typical year. However, I believe it is quite probable that gold prices will bottom between now and January and we will see sharply higher prices from there.

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