China Golden Week Causing Gold Price Weakness – When to Buy!


China Golden Week Causing Gold Price Weakness – When to Buy!

There are two China Golden Weeks.

One happens around the Chinese new year at the end of February.  The second China golden week occurs in October and is called the National Day Golden Week and Mid-Autumn Festival.

Both of these golden weeks mean that all Chinese workers are given a full seven days off, twice a year.

China Golden Week in October start officially on Monday October 2nd, 2017.

The week leading up to the holiday sees a lot of stock market volatility.

After the holiday passes, the following week is traditionally a very bullish one for the prices of gold.  The effect of China golden week is another example of seasonality patterns.  Click here to read more about gold seasonality.

This year, China Golden Week is over starting Monday October 9th, 2017.

But will gold prices rally?

 

China Golden Week – Past Performance in Review

The China Golden Week statistics are pretty remarkable.

In the last four years, this golden week was the precise momentum reversal point after which the prices of gold jumped significantly.

This 2017 it appears that the trend has started a little earlier.

With China traders expected to come back to work on October 9th, 2017 we are using this week as an opportunity to buy gold at key support levels.

(Charts courtesy of ZeroHedge)

 

China Golden Week – How to Trade It Successfully

Like any seasonal pattern, the China Golden Week trade is not a guaranteed one.

However, we can see that seasonal forces are at play and they are creating a unique buying opportunity for a quick profit in the gold market.

The China Golden Week trade should follow these steps:

  1. Find out when the October golden week ends in the current year (it’s October 9th in 2017)
  2. Conduct careful technical analysis and find the key support and your entry
  3. Analyze where you stop loss should go to provide your trade ample opportunity and time
  4. Based on your stop loss, determine the size of your trade
  5. execute it!

We personally prefer to use the gold futures market instead of ETF products.  This is because gold trades around the clock but most volume happens in the London session. During this session, ETFs are closed for trading.

This absence of trading in the most volatile time period leads to a lot of overnight holding risk and gap risk.

That’s just one reason of many to stick with futures over ETFs.

However, if you only want to trade and ETF product, I strongly recommend the “GLD” ETF – it holds physically metal and is very actively traded on the market. There is no lack of liquidity, that’s for sure.

 

China Golden Week – Conclusion

There is no perfect trade that works all the time.

In fact, the more a trade works the less likely it is to work the next time around.

Chinese traders are a big portion of the physical demand of gold.

With most traders and employees off for China Golden Week the markets face an over supply issue and prices sustain a drop to compensate.

Once traders and employees return to work there has historically been a big rally in gold prices.

We will find out if this will be true once again this year, but it is a trade worth taking.

Wish you good luck and good trading.

 

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The information contained in this post is solely for educational purposes, and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable to your own financial situation. TRADEPRO Academy is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.