Gold Price Rallies But Snaps December Pattern, Holds Lower Ahead of the Fed
Wednesday, 12/13/2023 11:53
GOLD PRICES slipped to new multi-week lows Wednesday, holding strong gains for the year as a whole but showing a 2.7% loss for December so far in Dollar terms, snapping the seasonal gold price pattern of the last decade, when the last month of the year has seen the precious metal rise as often as it rose in January, 7 times in 10.
With the Federal Reserve expected to leave Dollar interest rates on hold but repeat the mantra of 'higher for longer' for 2024 in its December policy announcement today, gold priced in the US currency fell close to 4-week lows at $1973 per Troy ounce before rallying $10 in London.
Trading down to €1829 for Euro investors before rising to €1839, the gold price also hit a new 4-week UK Pound low at £1572 and set an 8-week low in the Japanese Yen below ¥9,250 per gram.
Gold prices have tended in recent decades to see a rise in the New Year and spring, followed by a summer drop or lull, and then a further rise into year-end.
Some analysts link that pattern to seasonal changes in
global demand for gold. They see those price changes leading what happens to silver and platinum prices between January and December, too.
Might 2024 repeat that pattern in the gold price? The infographics below show you how gold prices have moved across the calendar year over the last two decades.
The first chart shows you how many times, over the last 20 years, each month showed a gain for gold in either US Dollar terms, or Euros, British Pounds or Japanese Yen.
The second infographic then shows you the last 20 years' average monthly price change for gold in those 4 major currencies, too.
Whatever pattern you might or might not see in the chart, consumer gold demand does have a clear seasonal pattern.
Demand in China – now the world's heaviest gold consumer nation, outpacing former No.1 India 15% by weight each year – peaks with Chinese New Year. That's followed by Valentine's Day, and then the festive season of Akshaya Tritiya in southern India.
The summer brings a lack of festivals or weddings on India's Hindu calendars, before household demand in the No.2 consumer nation jumps in the run-up to Diwali. Followed by Christmas – the peak gifting season across Europe and the Americas – that then runs into retailer stockpiling for the Chinese New Year again.
Consumer demand is not the only factor which can affect gold prices however. Rising assets tend to require inflows of investor cash, both driving and chasing prices higher.
With that in mind, check out January's track record for rising precious metal prices. Because, as our interactive chart shows, gold has risen 14 times at New Year in US Dollar terms since 2004. Silver rose 13 times and platinum has risen more repeatedly still, up 17 times in the last 20 Januarys.
So the New Year clearly invites strong investing into precious metals. Here at
BullionVault, in fact – the world's largest online investment service for physical precious metals – January has repeatedly seen more new bullion investors than the following year's monthly average, and it was the very best month of the year for new account openings 3 times in the last decade.
Why this repeated surge of interest at New Year?
Gold may benefit because investors use the start of January to review their portfolio and rebalance their holdings of bullion, equities and bonds.
January may also bring heavy demand to
invest in gold because – looking at the 12 months ahead – wealth managers and private savers alike focus on potential risks to their money. So they choose to buy a little investment insurance for protection.
That would help explain why January is the best single month for gold gains over the last 20 years for US Dollar investors, matched only by November's strike rate between 2004 and 2023. But November doesn't come close to January's average monthly gain, lagging the New Year's figure of 2.9% with an average 1.6% rise.
Even so, note also that December is catching up. Over the last decade in fact, it now matches January's strike rate, with the gold price in Dollar terms rising 7 times. Maybe that reflects wholesalers buying in China, preparing for Lunar New Year demand by stockpiling metal sooner than later. Perhaps it also reflects short-term traders spotting the January bump and buying early, effectively betting on a repeat of the seasonal pattern.
Past performance is no guarantee of future performance, of course. And what drives this New Year pop in bullion prices isn't 100% clear either. But history says that, over the last 2 decades on average, November and December made a good time to buy gold, as well as silver or platinum, ahead of that repeated rise in January.
Might 2024 see gold's seasonal pattern deliver a profit to New Year buyers once more? December 2023 began with the gold price surging to new all-time highs in spot-market trading, but that
blowoff top in the gold price went just as fast as it came, and based on the London daily benchmark price (which BullionVault's analysis uses in the research and graphs on this webpage) the precious metal is currently on track for a 2.7% monthly drop.
That lowers the bar for January to beat, while still putting the gold price on track for a solid year-on-year gain at new record year-end levels, more than 9.2% higher in US Dollars from the close of 2022, 5.3% higher in UK Pounds, 8.3% in Euros, and a massive 21.6% higher in Japanese Yen.
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