We Buy Gold… but for how long?

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So gold has been rallying like there is no tomorrow, typically it doesn’t do well and it’s market jitters that are driving it up, but will it continue in the coming months? Mario Roberts says it will pull back in March and here is why.

Based on Mario Roberts’ analysis he bases his analysis on seasonality and so it took him a little a bit by surprise when it rallied more last week. Until he looked at his analysis, and this is why he is shorting gold and is bullish on the S&P500 in March.

“I first started at looking at my book, ‘Discovering The Pattern’, on page 15 it has the table below. It shows all the monthly returns by year. I wanted to look at historical years where Jan and Feb had really bad returns which turned out to be 2000, 2002, 2003, 2008, 2009 and 2016 (highlighted in yellow).” Mario Roberts said.

“If we have 2 bad months in a row then typically the third and fourth month is positive, also the average return for March and April going back 1983 where 1.3% and 1.5% respectively.”

Month Returns S&P500

“So based on this I am confident that March and April will be a better month in 2016 for the S&P 500 (SPY).

I also wanted to dig and see if it was true for gold as well, so I looked at the returns for those same years to see what March and April would be like for March and April, below is the monthly returns for ishare gold (IAU).” Mario Roberts said.

 GOLD ETF monthly returns IAU

“As we can see as the S&P500 did badly gold does well as predicted, but also looking at the same years March and April traditionally did badly for gold and then did well in May.

There are signs that we are in a recession and so after May, gold may rally again and we may see a pattern of 2008 for gold happening again. It will be important to monitor the swing this coming few months.” Mario Roberts concluded.

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