Buy Gold In The Winter?


  • Technical analysis shows Gold has a tendency to bottom out around the winter months.
  • January and February are a good time to buy.
  • Reason is mainly due to the demand for gold, especially from India.
  • May also be linked to perceptions of stock market performance.

A friend of mine is a firm believer in the price of gold. According to her, similar to property, the price can only go up.

As a young investor I have plenty of time to enter the market. Sage-like words from Terry Smith often enter the picture at this point, he suggests the best time to put your money in the market is now. If you try to time the market you will inevitably miss the bottom, and through a plethora of behavioural biases end up buying at the top. If you manage to ride the market perfectly it may lead to overconfidence, which is another sure way to lose money as you begin over-investing or over-trading and racking up commissions. Therefore, providing you have 10+ years on your side, just put it in.

However my friend throws this advice in the air by insisting that the best time to buy gold is January/February. I decided to investigate, and the graph below suggests she could be on to something.


Ok, so what are we looking at? I went onto the BullionVault website and took a screenshot of the price of Gold USD/kg (note it is usually quoted by ounce in the media). I then circled the winter months for each of the past five years.

What I saw was a pattern, one which also continues if you extend the graph another 5 years. The price of gold dips in the winter months. October 2012 to January, November 2013 to December, November 2014 to January, November 2015 to January, November 2016 to January.

A few things to note immediately:

  • Past performance doesn’t mean similar future performance, however I found this pattern to be too compelling to ignore. It appears (nearly) every year.
  • A fall doesn’t necessarily mean it’ll rise again. 2013 the gold price kept falling.

Despite the drawbacks there are some rational reasons for this price movement.

Investors looking for protection against geopolitical risk, stock market turmoil or global recessions, often turn to gold. This is because of its perception among investors as a safe haven, which has practical applications as its limited supply means protection from forces such as inflation.

Therefore one may imply that a reason for the decrease in price over December could be due to the perception that stock markets perform well over the winter period. The so-called Santa Claus rally may mean investors are more likely to invest in the stock market than in one of its hedge products, gold. Whilst plausible this is in some senses trying to explain an improbable asset price movement with, well, an equally improbable movement. For example this explanation could also infer that there is a santa claus rally because investors are selling their gold.

Correlation =/= Causation. For example this year we see the price of gold fall because Trump’s presidency has not caused the geopolitical fallout expected, therefore the demand for the safe asset Gold has decreased and the markets have rallied on this confidence. Therefore we may observe a Santa Claus rally this year, but it is the cause of Trump’s presidency and not a cyclical trend in stocks and gold.

A more nuanced explanation brings us back to supply and demand. As the graph below shows, one of the largest markets for gold is India.



The wedding season in India begins around September and ends in January, the period between monsoons and stifling heat. During wedding celebrations the bride and groom may wear thousands of pounds of gold, and gifts of bullion and coins are common. The demand for gold in this period is so substantial it has been referred to in the past as having influenced the price. Brooke Thrackray of AlphaMountain Investments has stated that gold stocks have been profitable in 17 of the past 25 Indian wedding periods, including 11 of the past 14, and the average gain was 7.2%. It is therefore unsurprising that following the wedding season the price of gold may decrease.

The correlations are all there, but as mentioned previously, causation is difficult to pin down. There is no harm waiting for the end of the Indian wedding season to buy your gold. But at the end of the day the dips and rises account for dust among the long term horizon of growth. It causes a lot less stress if you simply buy and hold now.


**This post is written as an observation of market movements and the opinion of the writer solely. It should not be used as direct financial advice, which you should receive from an accredited financial adviser.


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