The Santa Clause gold miner rally
Key points:
- Almost all of us have heard reference to the "Santa Claus Rally" in stocks.
- Gold-related stocks have enjoyed a boost during this seasonal window, too
The Santa Claus miner rally
Most of us are aware that stocks have a seasonal tailwind around this time of year. Less known is that gold-related stocks have enjoyed consistent gains, as well.
As a proxy, we will use the Fidelity Select Gold fund (FSAGX). Per Fidelity:
Investing primarily in companies engaged in exploration, mining, processing, or dealing in gold, or to a lesser degree, in silver, platinum, diamonds, or other precious metals and minerals. Normally investing at least 80% of assets in securities of companies principally engaged in gold-related activities, and in gold bullion or coins.
The period in question begins on the close of the 11th trading day of December and extends through the close on the first trading day of January in the New Year. For 2021 this period extends from the close on 12/15/2021 through the close on 1/4/2022.
The chart below shows the cumulative growth in FSAGX only during these seasonal windows since 2000.
When we look at the year-by-year results, we can see that 30 out of 33 years were winners or flat, with the losses being relative small compared to the average gain. The last 14 years were all winners.
Alternatives to the Fidelity fund
Fidelity imposes a fee for positions held less than 29 days. As a result, while FSAGX is good as a proxy for backtesting purposes, it is probably not the best actual trading vehicle. Other choices include ETFs like GDX and GDXJ (NUGT offers 2x leverage - twice the potential gain but also twice the potential risk).
Another alternative is the ProFunds Precious Metals UltraSector Fund (PMPIX) which is leveraged 1.5 to 1. The table below shows the fund had higher risk and higher reward.
What the research tells us…
Gold mining stocks have demonstrated a tendency to advance during the second half of December in recent decades. Trading a gold miner mutual fund or ETF may allow a trader to take advantage of this tendency.