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.

Mines and Metals Up During the Last Four Months of the Year 10 of Past 12 Years

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.