Seasonal Patterns In Commodities

Over the past several months there have been spectacular rallies in numerous commodities, from copper to crude oil to soybeans.

In light of this many investors are wondering how they can optimally exploit the striking seasonal trends in commodities.

However, in contrast to the seasonality of stocks, there are three important points one has to be aware of in connection with the seasonality of commodities. I would like to present these to you today.

The seasonal pattern of the S&P GSCI Spot Commodity Index

The S&P GSCI Spot Commodity Index is one of the oldest commodity indexes. Its history dates back to the beginning of 1970. The S&P GSCI Spot Commodity Index approximates spot market trends by tracking the prices of nearby futures contracts.

The seasonal chart shows the annual seasonal pattern at a glance

Let us take a look at the seasonal chart of the S&P GSCI Spot Commodity Index. In contrast to a standard price chart, the seasonal chart below depicts the average price pattern of the S&P GSCI Spot Commodity Index in the course of a calendar year. To this end, price returns have been averaged over a span totaling 30 years.

The horizontal axis shows the time of year, while on the vertical axis the seasonal chart depicts price information (indexed). This seasonal chart, therefore, provides us with an illustration of the typical seasonal pattern of the entire commodity market at a glance.

S&P GSCI Spot Index, seasonal pattern over the past 30 years

S&P GSCI Spot Index, seasonal pattern over the past 30 years
There is a good entry point in the second half of March. Source: Seasonax

As this indicates, there are good seasonal entry points for the commodities in the S&P GSCI Spot Index at the end of January and then again in mid-March.

Three Tips for Optimizing Seasonal Commodity Investments

However, investing in commodities differs from investing in stocks. One can e.g. not simply buy soybeans and put them into one's portfolio or store them in the garage. One requires a vehicle such as an ETC, a commodity ETN, or a commodity certificate. Investing in commodities is associated with several effects in this context. One, therefore, has to keep the following three points in mind when conducting a seasonal analysis of commodity investments:

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With the help of a bullish underlying trend, particularly large profits could actually become possible with seasonal investment strategies in commodities in the coming months and years. Therefore, ...

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