Gold's Seasonal Pullback: A Normal Correction Before Winter Rally

Gold's recent selloff of 11.7% from late August to late September may seem justified, given its blistering rally and mini-mania in Fed-rate-hike expectations. However, this pullback is not a new phenomenon; it's a seasonal trend that has occurred for years.

The gold price tends to correct itself before the winter rally, which is one of the three distinct seasonal rallies in gold's bull market cycle. The autumn rally typically runs from late June to late September and averages 5.5% gains across 22 bull years.

This year's autumn rally was unusually strong, with a surge of 17.4% mostly in August, more than tripling its usual gains. This compressed the odds for a larger seasonal pullback, which indeed occurred from late September to early October, averaging 0.5% across all modern gold-bull years.

The latest selloff was attributed to soaring Fed-rate-hike odds and Trump's new Fed chair's hawkish speech on inflation at Jackson Hole. However, it's also possible that weak seasonals played a role in gold's recent decline.