- It is common sense that there is a seasonal pattern in commodities, especially in the gold market.
- I did some tests over the last 20 years to exploit this effect in a simple strategy.
- The strategy is to buy in August and to hold till the end of March.
- As performance figures show the strategy has approximately the same annual return as the buy-and-hold approach.
- However, looking at the volatilities and the maximum drawdowns show clear improvements in terms of risk in favor of the strategy.
- If you are a long-term investor or if you using gold as a portfolio insurance/diversifier stay with buy-and-hold.
- A more active trader/investor should use seasonal effects to build a more superior portfolio in terms of risk-to-reward.
✓ Former hedge fund portfolio manager/trader
✓ 15 years of experience in financial markets
✓ Master of Science (MSc) in Business and Economics from the University of Basel
✓ Developed quantitative tools for an asset management