Gold has just concluded its best quarter since 1986, but those looking to buy it now might wish that it had plunged to start the year.
That may sound counterintuitive, given the perception that commodities tend to trend in one direction or another for long periods of time. But a look at returns from the past 30 years shows that gold tends to have better results in a given quarter when the preceding quarter was terrible than when it was terrific.
To do this comparison, the past 30 years of quarterly returns were narrowed to those with returns in the top 10 percent (with a gain of 9.8 percent or more) and those with returns in the bottom 10 percent (with a loss of 5.5 percent or more). The next step was checking on the returns in the quarters that followed those best 12 quarters, and on the returns that followed those worst 12.
The average quarterly move after a fantastic quarter is a 2.5 percent rise, which is better than the average move across all quarters of a 1.3 percent rally. However, the average move across a wretched quarter is a 3.4 percent rise, with the median even higher, at 4.0 percent.