Chart of the Week: Season for Metals

Yesterday kicked off what has historically been the strongest period (September through December) of the year for mining stocks and gold. We discussed this back in August (Ready, Set, Gold!) but if you were out enjoying a family vacation, don’t worry you probably haven’t missed the opportunity.

Research from Barry Cooper at CIBC shows that while gold has historically performed well in September—prices have risen 81 percent of the time over the past 20 years—those investors who held their investment through the end of the year reaped the most benefits.

CIBC measured the performance of gold stocks over the past eight years for two time periods: August 20-September 20 and August 20-December 31. The shorter period netted a gain of 12 percent while holding the latter gained 28 percent.

Seasonal patterns are strong for gold but what about base metals?

This chart from Desjardins Securities shows the percentage change for the TSX Mines & Metals Index during the last four months of the year. Like gold, this base metals index has increased 10 of the past 12 years during the September-December period, with a median gain of 7.5 percent.

If you throw out the extreme years—up 50 percent in 2003 and down 68 percent in 2008—then the average increase rises to 10.5 percent.

Although these seasonal patterns have been strong for some time, it’s important to remember that they’re never 100 percent. However, they can be used to increase our probabilities of making the right investment decisions.

The S&P/TSX Capped Metals and Mining Index is a capitalization-weighted index.

About Frank Holmes 264 Articles

Affiliation: U.S. Global Investors

Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., which manages a diversified family of mutual funds and hedge funds specializing in natural resources, emerging markets and infrastructure.

The company’s funds have earned more than two dozen Lipper Fund Awards and certificates since 2000. The Global Resources Fund (PSPFX) was Lipper’s top-performing global natural resources fund in 2010. In 2009, the World Precious Minerals Fund (UNWPX) was Lipper’s top-performing gold fund, the second time in four years for that achievement. In addition, both funds received 2007 and 2008 Lipper Fund Awards as the best overall funds in their respective categories.

Mr. Holmes was 2006 mining fund manager of the year for Mining Journal, a leading publication for the global resources industry, and he is co-author of “The Goldwatcher: Demystifying Gold Investing.”

He is also an advisor to the International Crisis Group, which works to resolve global conflict, and the William J. Clinton Foundation on sustainable development in nations with resource-based economies.

Mr. Holmes is a much-sought-after conference speaker and a regular commentator on financial television. He has been profiled by Fortune, Barron’s, The Financial Times and other publications.

Visit: U.S. Global Investors

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