30 January 2023

A Guide to Seasonal Trading Strategy in Gold Trading


If you’re into trading, you may have noticed that it’s no guesswork. 

You need to grasp market behavior to profit from each session. And this involves using fundamental or technical analysis to review the market. 

Once you start analyzing it, you’ll start to notice seasonal patterns. You’ll realize how specific financial instruments behave at different times of the year. This is known as the seasonal patterns of the financial market.

Seasonal patterns apply to every moving instrument. 

For instance, gold is known to perform best at the beginning of the year, i.e., January and February. It’s also usually traded in a range from March to July, and after this, it peaks again in August and December. 

Are you interested in profiting from these patterns? This article covers all you need to learn about the seasonal gold trading strategy and how to profit from it.

What is gold seasonality?

Gold seasonality refers to the periods in a year when gold is either stronger or weaker. These situations repeat themselves but don’t fall yearly on the same day or month. 

Based on its seasonal cycle, gold rises in the year’s first quarter and last months. This includes January, February, August, September, November, and December. But, gold tends to fall from late February to early April.

How does gold seasonality work?

Gold’s seasonality is calculated as the average profit or loss for given periods of the commodity. It’s also calculated as the yellow metal’s net positive or negative performance across a specific period. 

Benefits of seasonal gold trading

Seasonal trading in Gold is easy to do for the following reasons:

Data is easily accessible

Historical trends and performance of gold are available as data points from the past. Seasonal cycles are also tracked and reported, providing enough evidence to support price predictions.

More opportunities

Most seasonal trends have time frames that are less than a year, letting investors take advantage of different trading opportunities before the year ends. Investors may outperform the benchmark through short-term profitable trend analysis.

Short holding period

Seasonal trading strategies last until the trend ends, providing high liquidity for investors to identify the next big trend.

Buy low and sell high

The basic principle of seasonal trading is to buy at the start of the trend and sell when it ends. This lets you maximize profits as you’ll spend funds at low prices and sell gold at higher prices.

Limits of gold seasonal trading

Drawbacks of the seasonal trading strategy include:

Trend timing

For the seasonal trading strategy, timing is vital for maximizing profits. You could suffer a loss with a wrong entry or exit.

Time-consuming research

Seasonal trading involves selective positioning. As such, investors need to spend long periods studying recent market trends.

Six tips for successfully trading in seasonal gold periods

A seasonal trading strategy can be an effective tool for your gold trading. Here are some tips to increase your profit chances: 

Trade gold during months when the price is above average

Studying price charts lets you know when the gold price is about to rally. You should buy during a seasonal dip and sell when the price rises. For example, you can buy gold in March and sell it in August or September.

On the other hand, you can buy at the start of the month and sell at the end. But, you need to be cautious because this strategy is reserved for traders with a huge risk appetite.

Use Fibonacci retracement to spot high levels of support and resistance

The Fibonacci retracement is a level that stems from the Fibonacci sequence. They are horizontal lines showing where support and resistance are likely.

Each level is linked to a percentage. The percentage represents how much of a last move has been retracted by the price. The retracement levels are 23.6%, 38.2%, 61.8%, and 78.6%. 50% is also used, even though it’s not an official Fibonacci ratio. 

The indicator is vital because it can be drawn between two significant price points, e.g., a high and a low. Next, it will create levels between both points. 

With seasonal trading, you can combine the Fibonacci retracement and seasonal gold pattern. This will help you find good buying opportunities. You should also track when gold changes from the previous market swing to 0.618 Fibonacci Retracement. 

This is the inverse of the golden ratio, or 1.618. Historically, the gold price rallies after reaching the inverse number. 

Buy at support and above resistance

When you analyze it, you should buy gold if the price trades at support. This action should be repeated when it breaks above the previous resistance. Additionally, ensure you set a stop loss below the previous swing low.

Trade at the “best times” of the day

There are specific periods of the day during gold seasonality when liquidity is high. Good examples are during trading hours in New York and London. During these times, price movements tend to increase. 

The volume of transactions also increases when market sessions overlap. It happens between 13:00 and 17:00 GMT for US and European markets. Another occurrence is between 7:00 and 9:00 GMT, for the Asian and European markets overlap.

Look for potential trading opportunities on breakout

You can identify when to trade gold using a symmetrical triangle and an RSI indicator. This will let you know where consolidation is bound to happen. When both trend lines meet, price movement becomes tight. This could lead to a price breakout.

You can place an order for gold when the price breaks out. But, you must place a stop loss below the descending trendline as it passes the convergence point. You can issue a sell order if the gold price successfully breaks out. 

Go long on a bullish breakout, short on a bearish breakout

Start by tracking the gold price over six months. It will be a bullish breakout if it hits a new peak after six months. If it goes the other way, you should go short. 

Start seasonal trading today!

Seasonal trading is an effective strategy to utilize price changes throughout the year. 

We hope this article will help you maximize returns from this strategy and record huge returns. 

To start locking in Gold profits today, simply sign up with ISA Bullion, provide relevant documents, make a small deposit and start trading with ease!

You can also access Gold & Silver spot trading markets, news and live price charts, all from your ISA Bullion dashboard. 

You can also use your ISA Bullion app to make trades from anywhere globally. Sign up now and maximize your seasonal trading opportunities.

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