We have been trading the gold sector for income since the late 90’s, and we’ve learned there is a pattern that repeats itself. Once recognized, it provides a major opportunity for short-term gains. This opportunity is not meant for our long-term buy and hold portfolio—for us, it is perfect for trading price moves in the one- to three-month range. This is not investment advice. We are simply pointing out a consistent pattern that unfolds with impressive regularity. Should this pattern continue to play out, it would mean a major buying opportunity could be upon us in the precious metal sector.
For our trading account, we focus on two major buying opportunities per year in the precious metals sector. One is in the winter, usually in December—the other is in the summer, typically June or July. If we could only make two trades per year, these are it. Below, you will see the kind of price performance gold, and leveraged ETF’s that track gold and gold mining companies, have returned over the past few years.
On this first chart, we highlight each cycle, from beginning to end, with a rectangle. As you can see, there are two of these cycles per year. Gold tends to rally strongly beginning in December, flatten out during the spring, and then drop into mid-summer, only to then do it all over again. The rallies out of these lows are the sweet spots for us. On the bottom of each cycle, we’ve marked the duration from beginning to end. Since this is a weekly chart, each bar represents one week. You can see that they range from 21-30 weeks in duration—twice per year.
See the rallies on the left side of each rectangle? That is the rally we at Wanderer Financial trade. We typically add leverage to this trade by using a 3X gold mining ETF such as JNUG. Using leverage can be catastrophic to an account if not used properly, but when used appropriately, we find it to be a very useful tool. To show you the kind of leverage that JNUG can provide over the price of gold, look at the chart below. We highlighted gold’s percentage increase from low to high during that period, as well as JNUG’s during the same period.
3X ETF’s were never designed to be an investment. They are a short-term trading tool only. Like most leveraged trading tools, their price will decay over time, so buying them and holding for the long-term is not a viable strategy. For levering short-term price movements up to a few months in duration, however, we find them very effective. Here, at Wanderer Financial, we focus on a variety of indicators to catch the majority of each cyclical move in gold. We believe that another major opportunity is imminent, and we, and our subscribers, intend to take advantage of it.