According to data compiled by Jeffrey Hirsch and John Person of the Commodity Trader's Almanac, spring and early summer is typically bearish for gold and gold stocks. A quick look at the charts shows this pattern to be true in recent years, and all signs point to a repeat performance this year. But seasonal weakness, like spring rains, creates opportunities for a flush fall harvest.
And history suggests this year could provide a bumper crop for gold bugs. With gold prices looking to find support above $1550 an ounce, the consolidation pattern appears to be progressing right on schedule for a July rally.
Buying season typically begins in July, meaning now is the time to be picking your gold stocks for eventual purchase. Because of the wide variety (and quality) of gold stocks out there, I suggest going with smaller production growers – those with market caps between $500 million and $2 billion that have shown a tendency to hold their own during market corrections.
We're looking for companies that are in production because they will enjoy a near-immediate positive boost from higher-trending gold prices. Remember that this is the catalyst you're basing your trade on.
If you're on the edge, consider that over the last two years, between June 1 and September 30, the price of gold rallied 6.7% (2010) and 5.4% (2011). With gold trading fractionally down as of the 7th day of June 2012, it appears that – if history repeats again – the early summer pattern is bullish for gold stocks later in the year.