|Moore Research Center Seeks Historical Tendencies For Gold, Other Markets
24 September 2010, 12:11 p.m.
(Kitco News) - Veteran futures traders might be aware that a seasonally strong period for gold tends to occur during September. They can check this through the work of a research organization that quantifies these trends as well as identify some historical tendencies for corrections.
For instance, data compiled by Moore Research Center, Inc., shows that Comex December gold futures closed higher around Oct. 1 than Sept. 10 in 13 of the last 15 years, with an average gain of around $20 an ounce.
However, the data also show that December gold then closed lower around Nov. 2 than Oct. 8 in 12 of the last 15 years, with an average decline of around $11.70 an ounce.
But then gold historically tends to pick up again. The data shows that February gold futures closed higher around Nov. 28 than Oct. 26 in 12 of the last 15 years by an average of $20 an ounce. Then February gold futures, from around Dec. 20 to 27, rose in 13 of the last 15 years by an average of $6.50 an ounce.
The firm, based near Eugene, Ore., does a highly detailed, computerized analysis of historical trends in all of the major commodities markets. The center looks at the price for each day of the year, such as Jan. 2, and then determines how often in the last 15 years the market has risen or fallen over the next seven days, then the next eight days, and so on up to three months. Then it does the same thing starting from Jan. 3, Jan. 4, and so on.
The system literally looks at thousands of possibilities for both outright futures contracts and spreads. Moore Research Center then highlights the time periods when there have been meaningful moves at least 80% of the time.
Veteran traders, whether metals or grains, are typically aware of the seasonal tendencies intuitively, said Jerry Toepke, editor of publications for the Moore Research Center. “All we’re doing is quantifying them.”
The firm’s clients include hedge funds, commercial hedgers, brokers, large speculators and novice investors, the latter who may benefit the most if they’re not already aware of seasonal patterns. The Center released an 86-page “2010 Historical Metals” report this week.
Traders want to know historical tendencies, particularly in markets such as grains and livestock that have natural patterns tied to harvests, said Sterling Smith, commodity trading adviser and market analyst with Country Hedging. “Moore Research, as far as seasonal things, is far and away the No. 1 place. Their data and information is quite, quite solid.”
Dennis Gartman, publisher of the widely followed Gartman Letter, concurred. “They are excellent,” he said.
Still, Smith said he would not rely solely on seasonal data to make a trade recommendation. And that’s not the intent, Moore’s Toepke emphasized.
“One thing you have to remember about our work is that it’s statistical in nature,” he said. “We are taking the daily futures prices…and finding what the market has done, how often it has done it, and with what kind of intensity it has done it. It is in no way making a prediction."
The reports are not meant as trading recommendations, but instead as another tool that traders can add to their toolboxes, Toepke said. “It’s up to them to apply their own common sense, technical indicators, fundamental knowledge, trading expertise and so on,” Toepke said.
The Moore Research Center was founded by President Steve Moore, who initially got into the futures business in the 1970s through hedging in the wood-products industry. He later opened a computer-research facility for a major brokerage, before starting the Moore Research Center in July 1989.
Toepke said the gold market often experiences “summer doldrums” and languishes into August, before picking up again. Buying from jewelry manufacturers normally rises ahead of a number of gift-giving holidays and certain other periods around the world, he explained. This includes the Muslim Ramadan observance, the period after the Indian harvest as many farmers convert their agricultural earnings into gold and silver, along with a wedding season in India, Toepke said. Historically, the country has been the world’s largest consumer of gold. Later, there is the Indian Diwali festival, followed by Christmas in Western nations and the Chinese New Year in February.
“You pack all of those celebrations into (a several-month period) and that makes September one of the by-far biggest months of the year for gold,” Toepke said.
Silver Tends To Follow Gold In Autumn, Rally From October To February
Silver’s autumn tendency is similar to gold. In 13 of the last 15 years, December silver futures have closed higher around Sept. 23 than Sept. 13. But in 12 of the last 15 years, December silver closed lower around Oct. 18 than Oct. 8.
Silver tends to make a seasonal low anywhere from August to October. “Then starting in November, silver has exhibited a strong tendency to rise right into February,” Toepke said.
The May silver futures contract closed higher around Feb. 21 than Oct. 28 in 14 of the last 15 years, Toepke reported. The average gain was $1.12 an ounce.
Platinum Has Seasonal Tendency To Rise Over Winter
Platinum has often made a seasonal bottom in October, before showing a tendency to rise over the winter, Toepke said. The April platinum contract has finished higher around March 1 than Nov. 1 in 14 of the last 15 years by an average of $132 an ounce. Furthermore, April platinum closed higher around Feb. 28 than Dec. 20 in each of the last 15 years, by an average of around $107 an ounce.
Meanwhile, Toepke said, platinum has tended to outperform gold from autumn into early spring. A spread trade held from around Oct. 27 to Feb. 15, in which somebody would buy. April platinum but sell April gold in equal ounce amounts, would have been profitable in each of the last 15 years. The average profit would have been $80 an ounce.
Copper Tends To Hit Low In December, Rally In New Year
Copper has a historically weak time period ahead, followed by a seasonally strong period, Toepke said.
“For the May and July copper contracts, the seasonal pattern shows over the last 15 years, they have most consistently made a seasonal low literally in the last week of December,” Toepke said.
Then copper rises, presumably as the construction sector builds inventories ahead of the summer-building season, he said.
The May copper contract closed higher around March 7, compared to Dec. 30, in 13 of the past 15 years. The average gain was nearly 15 cents a pound.
By Allen Sykora of Kitco News; email@example.com