Equity investors love to talk about the "January effect." It is an idea that stocks, especially small caps, tend to rally at the start of the year as tax-loss selling fades and fresh capital returns. But what's less widely appreciated is that gold has its own January effect — and historically, it's been even more reliable.
Statistically Significant Outperformance
World Gold Council research shows that since the early 1970s, gold has delivered average January returns of 1.79%. It is nearly three times its long-term monthly average. Gold has posted positive returns in close to 60% of all Januaries since 1971, rising to nearly 70% since 2000.
That compares favorably with equities, where the January effect has weakened over time as markets have become more efficient. Gold's version appears far more persistent, and for good reason.
Unlike stocks, gold doesn't factor in earnings upgrades or buybacks. January strength tends to coincide with portfolio rebalancing at the start of the year, renewed investment flows after December tax-loss selling, and physical restocking in Asia ahead of Lunar New Year celebrations.
The timing also lines up with periods of seasonal softness in real yields and, often, a weaker US dollar — historically one of gold's biggest tailwinds.
Gold has already rallied 7% so far in January, after a scorching 65% surge last yea
The Year's Pattern
In instances when gold failed to perform, the culprit has usually been the US dollar. Years like 2021 or 2022, when gold stumbled early in the year, coincided with sharp dollar strength accompanied by rising real rates. Such reminders show that seasonality isn't destiny but rather a statistical tendency.
After January, however, gold tends to turn less friendly. The metal typically experiences a softer stretch in late spring and early summer. Trading volumes are thinner, and jewelry demand drops off after peak buying seasons in India and China. This "summer doldrums" period, usually May through July, has historically been the weakest window.
Yet, that lull sets the stage for the next act. As investors return to offices, activity tends to pick up as Asian buying resumes, Indian wedding season approaches, and investors reposition ahead of year-end. Statistically, August through October ranks among gold's strongest periods, second only to January.
Working With Cycles
Industry veterans are well aware of this dynamic and have been planning their activities around it for decades. Legendary mining executive Robert McEwen says investors ignore these rhythms at their own risk.
"Investors should be aware that there is cyclicality and seasonality," McEwen said for Benzinga.
"You might want to buy during the tax-selling period at the end of the year, or you might want to buy in the summer. In the fall, precious metals usually do better."
Markets may evolve, narratives may change, but gold's calendar still matters. And January remains one of the few times each year when history consistently stacks the odds in bullion's favor.
Price Watch: SPDR Gold MiniShares Trust (NYSE:GLDM) is up 5.62% year-to-date.
Image: Shutterstock
