Gold and November

28Oct11

Since gold is a hot play at the moment (and one near and dear my wallet) I’m going to report monthly on any calendar seasonality bias that might exist for the upcoming month. This is a look at how gold has performed historically in November.

First, the (misleading) numbers…

From this 30,000 foot view, gold has been uber strong in November, returning more than twice the average month’s return over the last 35 years.

But averages can be misleading because they say nothing about how consistent an observation has been or whether it’s waxing or waning, so below I’ve assumed a trader was only long gold in November (red) versus the average month (grey) each year since 1976.

[logarithmically-scaled, growth of $10,000]

Note that gold’s “outperformance” is really the result of 8 fortuitous years beginning in 2003. Eight years do not an observation make, and I have to assume the outperformance we saw in the numbers was simply noise.

Like all seasonality plays this one has by no means been a sure thing and doesn’t by itself justify a trade, but I’m calling the calendar month bias for gold in November as NEUTRAL.

Happy Trading,
ms

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