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Gold Stocks’ Winter Rally 8
By: Adam Hamilton | November 25, 2023

Gold stocks have mostly ground lower to sideways since spring, leaving this contrarian sector really out of favor again. Yet both the metal and its miners’ stocks are early on in their strongest seasonal rallies of the year. From late October to late February, gold tends to enjoy excellent gains which the gold stocks leverage. Given 2023’s great winter-rally setup, gold’s bullish seasonals should prove potent tailwinds ahead.

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 behaviors 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 display strong seasonality because their price action amplifies 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.

This gold seasonality is fueled by well-known income-cycle and cultural drivers of outsized gold demand from around the world. And the biggest seasonal surge of all is just getting underway heading into winter. As the Indian-wedding-season gold-jewelry buying that normally drives this metal’s big autumn rally winds down, the Western holiday season ramps up. The holiday spirit puts everyone in the mood to spend money.

Men splurge on vast amounts of gold jewelry for Christmas gifts for their wives, girlfriends, and daughters. The holidays are also a major engagement season, with Christmas Eve and New Year’s Eve being two of the biggest proposal nights of the year. Something like a third to half of the entire annual sales of many jewelry retailers come in November and December! And jewelry historically dominates overall gold demand.

The World Gold Council closely tracks global gold supply and demand, publishing the latest data each quarter. During the last five calendar years, jewelry demand averaged 42.7% of overall total world gold demand. That is much larger than investment demand, which averaged 26.6% during that same 2018-to-2022 span. Year-to-date in 2023 at the end of Q3, jewelry demand is tracking at a similar 42.9% of the total.

The usual frenzied Western jewelry buying heading into Christmas shifts to pure investment demand after year-end. That’s when Western investors figure out how much surplus income they earned during the prior year after bonuses and taxes. Some of this is plowed into gold in January, driving it higher. Finally gold’s big winter rally climaxes in late February on major Chinese New Year gold buying flaring up in Asia.

So during its bull-market years, gold has usually tended to enjoy powerful winter rallies driven by these sequential episodes of outsized demand. Naturally the gold stocks follow gold higher, amplifying its gains due to their excellent profits leverage to the gold price. Today gold stocks are now once again early on in gold’s strongest seasonal rally of the year, driven by this annually-recurring robust winter gold demand.

Since it is gold’s own demand-driven seasonality that fuels gold stocks’ seasonality, that’s logically the best place to start to understand what’s likely coming. This old research thread focuses on modern bull-market seasonality, as bull and bear price action are quite different. Gold enjoyed a mighty 638.2% bull run from April 2001 to August 2011, fueling gold stocks skyrocketing 1,664.4% per their leading index then!

Following that secular juggernaut, gold consolidated high then started correcting into 2012. But the yellow metal didn’t enter formal bear territory down 20%+ until April 2013. That beast mauled gold on and off over several years, so 2013 to 2015 are excluded from these seasonal averages. Gold finally regained bull status powering 20%+ higher in March 2016, then its gains grew to a modest 96.2% by August 2020.

Another high consolidation emerged after that, where gold avoided relapsing into a new bear despite a serious correction. Later the yellow metal started powering higher again, coming within 0.5% of a new nominal record in early March 2022 after Russia invaded Ukraine. So 2016 to 2021 definitely proved bull years too, with 2022 really looking like one early on. Then Fed officials panicked, unleashing market chaos.

Inflation was raging out of control thanks to their extreme money printing. In just 25.5 months following the March 2020 pandemic-lockdown stock panic, the Fed ballooned its balance sheet an absurd 115.6%! That effectively more than doubled the US monetary base in just a couple years, injecting $4,807b of new dollars to start chasing and bidding up the prices on goods and services. That fueled an inflation super-spike.

With big inflation running rampant, Fed officials frantically executed the most-extreme tightening cycle in this central bank’s history. They hiked their federal-funds rate an astounding 450 basis points in just 10.6 months, while also selling monetized bonds through quantitative tightening! That ignited a huge parabolic spike in the US dollar, unleashing massive gold-futures selling slamming gold 20.9% lower into early September.

That was technically a new bear market, albeit barely and driven by an extraordinary anomaly that was unsustainable. Indeed gold soon rebounded sharply, exiting 2022 with a trivial 0.3% full-year loss. Gold kept on powering higher, reentering bull territory up 20.2% in early February 2023! So I’m also classifying 2022 as a bull year for seasonality research. Gold’s modern bull years include 2001 to 2012 and 2016 to 2023.

Prevailing gold prices varied radically across these secular spans, running just $257 when gold’s mighty 2000s bull was born to August 2020’s latest record high of $2,062. That vast range of gold levels spread over all those long years has to first be rendered in like-percentage terms in order to make them perfectly comparable with each other. Then they can be averaged together to distill out gold’s bull-market seasonality.

That’s accomplished by individually indexing each calendar year’s gold price action to its final close of the preceding year, which is recast at 100. Then all gold price action of the following year is calculated off that common indexed baseline, normalizing all years. So gold trading at 110 simply means it has rallied 10% off the prior year’s close. Gold’s previous seasonality before 2022 was added is shown in light blue.



During fully 19 of the last 22 years, gold has averaged excellent 13.8% annual gains! This great recent-decade track record should leave gold widely respected as an essential portfolio diversifier. All investors should deploy some small fraction of their financial assets into gold, like the traditional 5% to 10% which was considered prudent for centuries. Gold allocations stabilize returns, while protecting against market shocks...

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