by Adam Hamilton
Zeal LLC
Following a necessary correction, the gold miners’ stocks have spent much of recent months bottoming. This healthy basing process is rebalancing sentiment, preparing the way for this sector’s next bull-market upleg. That is looking to coincide with gold stocks’ spring rally, one of their strongest times of the year seasonally. That stiff tailwind blowing behind bullish technicals and fundamentals should make for big gains.
Seasonality is the tendency for prices to exhibit recurring patterns at certain times during the calendar year. While seasonality doesn’t drive price action, it quantifies annually-repeating behavior driven by sentiment, technicals, and fundamentals. We humans are creatures of habit and herd, which naturally colors our trading decisions. The calendar year’s passage affects the timing and intensity of buying and selling.
Gold stocks exhibit strong seasonality because their price action mirrors that of their dominant primary driver, gold. Gold’s seasonality generally isn’t driven by supply fluctuations like grown commodities see, as its mined supply remains relatively steady year-round. Instead gold’s major seasonality is demand-driven, with global investment demand varying considerably depending on the time in the calendar year.