Gold and Silver miners (Jr and Exploration)

[ThSeeker]

Interesting commentary. I hope it holds true this time.

Adam Hamilton
Contrarian, gold & precious metals

Summary

- Gold stocks are just entering their seasonally-strongest period of the year.

-Their big winter rally is fueled by gold’s own, which is initially driven by holiday buying and later investment.

- Both the metal and its miners’ stocks have strong tendencies to rally between late October and late February in bull-market years. It’s the best calendar span to own gold stocks.

- This year’s coming winter rally looks exceptionally bullish because the seasonal tailwinds won’t be overpowered by bearish sentiment, technicals, or fundamentals. All of these primary drivers are aligned with seasonals.

The gold miners’ stocks have largely ground sideways this year, consolidating their massive 2016 gains. That lackluster trading action, along with vexing underperformance relative to gold, has left gold stocks deeply out of favor. But these uninspiring technicals and resulting bearish sentiment should soon shift. The gold stocks are just now entering their strongest seasonal rally of the year, the super-bullish winter rally.

Gold-stock performance is highly seasonal, which certainly sounds odd. The gold miners produce and sell their metal at relatively-constant rates year-round, so the temporal journey through calendar months should be irrelevant. Based on these miners’ revenues, there’s little reason investors should favor them more at certain times of the year than others. Yet history proves that’s exactly what happens in this sector.

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 experience, as its mined supply remains fairly steady all year long. Instead gold’s major seasonality is demand-driven, with global investment demand varying dramatically depending on the time within the calendar year.

https://seekingalpha.com/article/4120485-gold-stocks-winter-rally-2