With today being the last trading day of July, it's a good time to consider seasonal trading ideas for August. Fortunately, traders don't have to veer into the unfamiliar in search of exchange traded funds with solid August track records.
The SPDR Gold Shares GLD, +2.40%, the world's largest gold-backed exchange traded fund, is up 11.32% year to date and 1.34% this month, gains that could be extended if GLD lives up to its historical August form.
Over the past decade "GLD has ended the month in positive territory 80% of the time, and has averaged a gain of 3.1%," according to Schaeffer's Investment Research.
For the 10 Augusts spanning 2009 through 2018, GLD finished higher eight out of 10 times.
Seasonal trends are great, but the more obvious catalyst for GLD and rival gold ETFs this week is the Federal Reserve meeting. GLD's performance this month is impressive considering the dollar is higher, too. If the Federal Reserve lowers interest rates, that could weaken the greenback, boosting dollar-denominated commodities in the process.
Additionally, lower interest rates boost the allure of gold because bullion doesn't pay a coupon or a dividend, meaning investors are entirely dependent on capital appreciation.
"A move higher of similar magnitude a month out would send the ETF barreling past its July 19 high of $136.63 and just south of $139, territory not seen since 2013. GLD has relied on Fed news of rate cuts to move higher this summer, with pullbacks finding support at its ascending 20-day moving average," according to Schaeffer's.
In terms of average August gains, the best ETF over the past decade, though its win rate has been lower is the iShares Silver Trust SLV, +0.85%. SLV, the largest silver ETF, averages an August gain of 3.48%.
For much of this year, silver has been lagging gold, but SLV is shedding that laggard status in a big way on the back of a July gain that is over 8% with just one trading day left in the month.
Of the 13 best ETFs in August over the past decade, five are commodities funds or equity funds with commodities exposure.
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