Seasonal Trends That Are Very Bullish For Gold
In addition to this time of the year being when friends and family get together to celebrate the holidays, it is also a time of important seasonal trends in markets. The January Effect is well known for giving a strong indicator of trends that will play out throughout the year. Stocks and sectors that perform well in the first month of the year, tend to have a good year ahead of them.
Another aspect of the January Effect is how stocks and sectors perform in the first week of January often have a strong January and get a good grade for the January Effect. Even before January rolls around there is a Santa Claus rally to monitor, which can give stocks a jump start on the January Effect.
From a technical perspective, the yearly chart on gold is very bullish, as it has gone from the bottom left to the top right during 2024, while making a series of record highs. One year charts such as this tend to keep going if nothing has changed with the fundamentals.
Recently, gold topped at $2800 on the futures chart just before the election, then corrected to just under $2600, and has since then been in a choppy basing process. Based on the one-year chart, gold is in a good position to have a strong Santa Claus rally and January Effect.
Whenever looking at trends in the charts, it is also important to be mindful of the fundamentals. Gold often tracks nicely with the growth in debt and with America in a Death Spiral of Debt that is a worldwide issue, this key fundamental is extremely bullish for gold.
Plenty of folks believed that Trump will cut spending, largely because of the campaigning by Elon Musk concerning the debt crisis. But, that goes completely against the evidence of Trump’s insane spending during his first term. Last week, during the political battle over the continuing resolution that threatened a government shutdown, we got a clear signal that nothing has changed for Trump when it comes to spending.
One of the first things he asked for was to eliminate the debt ceiling, he doesn’t want any restrictions on his spending. They didn’t give him what he asked for when they came to an agreement on the bill that kept the government open. We have not heard the last from him on this topic and he will probably take another shot in March when it comes to another round of negotiations when he is in office.
There are key factors that will cause the debt to get much worse during Trump’s second term. He’s a massive spender and will likely create more debt than he did in his last term. Plus, the debt has grown to an unsustainable level and now the cost of servicing the debt is a huge problem. The trend in the growth of the debt will drive gold much higher.
Inflation is starting to pick up again, even the Fed’s Powell admitted last week that their models on inflation have fallen apart. It is growing again before Trump is in office and his plans for deportations will take a lot of cheap labour out of the economy and push inflation higher. If he goes ahead with his tariff plans, it will add more fuel to the fire of inflation.
The trends in gold are very bullish as are the debt situation and inflation. Gold had a great year in 2024 and is in a perfect storm for 2025.
Since gold hit $2800 and then had a mild correction, the gold stocks gave back some of their hard earned gains in 2024. The best in breed gold miners, high-quality developers and explorers with important discoveries are coiled springs primed to get much stronger in January.
Another trend that plays out like clockwork every year that affects gold stocks, and other metals stocks, is the tax loss selling season. As investors sell stocks only for tax purposes at this time of year, and also due to mining stocks being relatively illiquid, they get beaten down. It isn’t about the quality of their projects, it is entirely about locking in tax losses.
The combination of the softness in gold since Trump got elected and tax loss selling season, has plenty of the stocks we follow in the reports to be on sale. But, as gold is primed to have a 2025 that rivals 2024, and tax loss selling ends in a few days, makes for the first quarter of 2025 to be very powerful for the gold stocks and other metals stocks.
With the growth I expect in debt when Trump gets into office, I suspect that 2025 will be an even better year for gold than 2024. I also see gold stocks, silver stocks and copper stocks as coiled springs primed to have a great year in 2025 starting in January.
In Closing
I’m very bullish on gold, silver and copper in 2025 and will be watching them closely for how they perform during the Santa Claus rally period and then the January Effect.
Additionally, I see plenty of stock picks for these metals ready to roll and will be putting out reports on top picks during the coming weeks.
This time of year, I also work on an outlook for the year ahead, that I put out late in December or early in January.
Enjoy the holidays and stay tuned for a bunch of reports to come out shortly.
All the best,
Allan Barry Laboucan
