The month of January is over and now we're faced with the prospects for the month of February in the gold stock sector. What seasonal tendencies can we expect for the month that lies ahead? Let's back to the recent past for insights.

In February 1995 the XAU rallied off a low made in January of that year, thus ending February '95 with a gain. The XAU was coming off a 4-month decline in late 1994 before finding bottom in late January '95 and then turning up for the oversold technical rally in February. The XAU rallied from a low of 98 to a high of approximately 107, just below the dominant interim 90-day moving average, before closing February '95 at 104.

The XAU was down slightly for the month in February 1996. Starting the month at around 147, the index rallied slightly above 150 early in the month in Feb. '96, only to fall back to its 30-day moving average to end the month at 144. This encounter with the 150 area was highly significant, for it formed a top not reached again until 10 years later.

February 1997 saw the XAU get off to a great start and end with a gain. The XAU rallied off a 2-year low at the 105 area in January to reach a high of 122.50 at the end of February.

In 1998, the month of February was a mostly lateral affair as the XAU began a trading range between the 70-78 area. The XAU started the month at 75 and closed virtually unchanged for the month at about 75.45, slightly below the 90-day moving average.

February 1999 saw a decline in the XAU from the previous month, through not by much. The XAU started the month of February '99 at 65 and ended at just above the 60 level, once again meeting resistance from the overhead 90-day moving average.

The next year's February was another trading range affair, with the XAU beginning the month at around 60, then rallying up to 70 but meeting with strong resistance from the declining 90-day moving average. This forced the XAU back down to the lower end of the range at 60 where it closed for the month, leaving it virtually unchanged from the previous month as it closed out February of the year 2000.

February 2001 started out on a negative note with the XAU declining from 50 down to 46. But the XAU found support around the 46 level at mid-month near the 90-day moving average and rallied back sharply the second half of the month, ending with a gain. The XAU reached a high just above 54 before closing the month at 52.50 for a net gain.

In February 2002, the XAU entered the month above its rising 90-day moving average and enjoyed a rally early in the month from just under 63 up to the 70 level before closing the month at 65 for a minor gain. Nothwithstanding the rally at the beginning of the month, February '02 was mostly a period of consolidation for the XAU from its January rally at the start of the year. It would go on to achieve considerably higher highs in the months following February.

February of 2003 was unusual in that the XAU entered this month above its rising 90-day moving average yet ended up having a negative month. The XAU started the month at about 76 and ended it at about 72. However, because the intermediate-term influences were clearly positive (as reflected in the rising 90-day MA) the XAU eventually recovered later that spring and went on to post a sustained rally lasting until the end of the year and taking the XAU to higher levels throughout the remainder of the year.

In 2004, February was a positive month, albeit a volatile one. That the XAU had a gain for the month was in part due to the bullish interim forces as reflected in the fact that the 90-day moving average was rising heading into February that year. That the month was erratic was due to the fact that the XAU had actually broken below the rising 90-day MA in January and entered the month of February below it. The XAU spent February '04 trying to recover back above the 90-day MA and it briefly succeeded before selling pressure pushed it back below the 90-day MA later in the month. Nevertheless, the XAU still had a positive February in 2004 with a gain of nearly five points.

February 2005 was a winning month for the XAU as the index was coming off a 2-month decline. The XAU opened the month by declining slightly below the 90 level before finding support and rallying sharply to the 90-day moving average at the 100 level. Because the overall trend of the 90-day MA was rising entering February '05, it was not surprising that the XAU had a positive month and went on to make a higher high the following month.

On balance, the month of February has been a month of consolidation since 1984. Since 1995, the XAU has seen a gain for the month of February in six years, a loss in three years and was essentially neutral in two years. Of the three losing years (1996, 1999, 2003) the declines were relatively minor and volatility wasn't a huge factor.

Another observation that can be made is that over the past decade, whenever the XAU's dominant interim 90-day moving average is declining entering the month, February tends to be either a negative or at best a neutral month of trading. When the XAU enters February after a sustained run-up, as in February 1996, the month is often used as a period of consolidation (as in Feb. '96 and '02).