Christmas/Santa Claus Rally in Gold and Gold Miners: Seasonality, Rules, Backtest and Performance Analysis

Christmas Day is one of the federal holidays in the US. It’s a well-known “fact” that there is normally a Santa Claus rally in stocks, but do we see the same tendencies in the gold price? Is there a Christmas/Santa Claus rally in gold and gold miners? Is there an end-of-year rally? Let’s find out:

Since 1980 gold has performed well over the Christmas holiday season. Thus, we can argue there is a Christmas/Santa Claus rally in gold. There is also a very strong performance for Gold miners during the Christmas period.

This is a typical seasonal we cover in our Daily Trading Edge. You try it for 1 USD for a month! Please read more about our different memberships.

Let’s go on to see how gold performs during the last days of the year:

Table of contents:

The Christmas holiday

It was not until 1840 that celebrating Christmas became widespread around the world. Even later, in 1870, December 25 was declared a holiday in the US. Since then, Christmas Day has always been a federal holiday in the US. Also, the 24th of December is now a day when most markets close earlier.

For decades the Christmas holiday has been a strong period for stocks, but let’s look at how the gold price has fared during this season:

Santa Claus rally in gold?

Let’s go on to backtest to find out if there is a Santa Claus rally in gold. We make the following trading rules:

We buy gold at the close of the OPEX day in December (the third Friday of the month); and
We sell at the close of the last trading day of the year.

(OPEX day, which is the monthly options expiration, happens on the third Friday of the month.)

If we backtest back to 1980 we get the following equity curve:

As you can see, the Santa Claus rally has been strong all the way back to at least 1980. The average gain per trade is 1.05%. The win rate is 65% – please read more about the win rate trading).

Santa Claus rally in gold miners?

Gold has performed well during Christmas, but what about gold miners? Let’s find out:

First, we backtest the HUI index (Gold Bugs) because it has a long history, even though this is just a cash index anis not tradable. We use the following trading rules:

We buy on the third Friday of December; and
We sell at the close of the year (it performs better if we hold for one more day).

We get the following equity curve from 1996 until today: