With all this talk of war and tapering, it might be time to step back and look more at forces outside of human control and their impact on precious metal prices.
In 2008 Brian Lucey looked at the influence lunar cycles have on gold, silver and platinum prices. This may seem unusual, but as we explained on Wednesday, there is a vast amount of research carried out that looks at the impact of moods and other such changes on equity prices.
Every week we look to the next central bank meeting or the next data release, each of us doing so in an attempt to gain some understanding of how the gold and silver price might react.
Many who have decided to invest in precious metals have done so thanks to their history. Both have proven their worth over thousands of years of monetary systems. They are one of the few things that we still have that can link us with the first civilizations that roamed the earth. Is it so unusual, therefore, to ask if something older than mankind might be affecting how we price these metals?
I don’t think so, the moon, we all know, is exceptionally powerful. It controls the tides, so is it unreasonable to think it may affect our pricing behavior, given we are over 50% water?
Trade by the moon
Lucey (2008) looks at both newmoon and fullmoon periods. He writes that ‘there is clear evidence that significant differences in returns as between both full and new moon periods and between these periods and the overall returns.’
The most interesting finding is, I believe, that ‘full moon are bad news’ when it comes to precious metal returns. This is particularly acute for gold, around a full moon returns for the yellow metal are ‘no less than 5 times smaller than the returns around the new moon.’
A similar finding is reported for platinum but to a lesser extent, ‘Platinum returns [are] three times greater in new moon periods as compared to full moon periods.’
But when it comes to silver, the existence of a lunar cycle on return is more pronounced than gold and certainly platinum. Lucey finds silver returns are four times greater in new moon periods, “new moon periods being positive while those in full moon periods being negative.”
Leave the moon to the werewolves?
Whilst Lucey conclude that there does not seem to be ‘a strong cycle in evidence’ when it comes to the lunar cycle and precious metals prices. However, perhaps be sure to note the moon’s appearance when the FOMC meet next week…I see it will be a full moon the day after the highly rumored tapering announcement.