I’m glad it’s over.
Valentine’s Day is accompanied by jewelry commercials that seem to get worse every year. This year’s theme hinted that buying expensive jewelry could ease a loved one’s pain.
Those sappy ads must work. Otherwise, the companies wouldn’t spend millions of dollars highlighting such sad stories.
But investors tend to delay their sadness until after Valentine’s Day. Or at least gold investors do.
Look at the seasonal trend for gold futures in the chart below. There is a peak in the week after Valentine’s Day.
Gold Futures Spike After Valentine’s Day
This year’s peak comes as bulls find reasons to buy gold. Analysts point to a break of a trendline that completes a triangle pattern. Blue lines in the chart highlight that pattern.
Gold Futures Reveal Seasonal, Tradeable Trend
Chart patterns are subjective. There are countless other trendlines that could be drawn on the chart. Instead of using those other options, bulls connect highs and lows that support their argument.
This doesn’t mean that patterns are useless. They can work at times, but in this case the pattern seems arbitrary.
Seasonal patterns, on the other hand, are objective rules. Any analysts applying the technique will see the same pattern any other analyst sees. They are also quantifiable.
We know that gold futures have traded down 68% of the time in March since the contract began trading in 1974. We also know that the trend begins in February with prices moving lower 65% of the time in the two weeks after Valentine’s Day.
I used gold futures in this analysis because of their long history. The same trend is seen in SPDR Gold Trust (NYSE: GLD), an exchange-traded fund (ETF) that began trading in 2004.
GLD can be an issue for traders concerned about taxes. Gains are taxed as ordinary income rather than capital gains and can require taxpayers to complete additional forms. Using options allows traders to gain exposure to GLD without that tax issue.
For March, put options on GLD could be the best precious metals trade.
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