Many investors, especially those new to
precious metals, don’t know that gold is seasonal. For a variety of reasons,
notably including the wedding season in India, the price of gold fluctuates in
fairly consistent ways over the course of the year.
This pattern is borne out by decades of data,
and hence has obvious implications for gold investors.
Can you guess which is the best month for
buying gold?
When I first entertained this question, I
guessed June, thinking it would be a summer month when the price would be at
its weakest. Finding I was wrong, I immediately guessed July. Wrong again, I
was sure it would be August. Nope.
Cutting to the chase, here are gold’s average
monthly gain and loss figures, based on almost 40 years of data:
Since 1975—the first year gold ownership in
the US was made legal again—March has been, on average, the worst-performing
month for gold.
This, of course, makes March the best month
for buying gold.
But: averages across such long time frames
can mask all sorts of variations in the overall pattern. For instance, the
price of gold behaves differently in bull markets, bear markets, flat markets…
and manias.
So I took a look at the monthly averages
during each of those market conditions. Here’s what I found.
Key point:
The only month gold has
been down in every market condition is March.
Combined with the fact that gold soared 10.2%
the first two months of this year, the odds favor a pullback this month.
And as above, that can be a very good thing.
Here’s what buying in March has meant to past investors. We measured how well
gold performed by December in each period if you bought during the weak month
of March.
Only the bear market from 1981 to 2000
provided a negligible (but still positive) return by year’s end for investors
who bought in March. All other periods put gold holders nicely in the black by
New Year’s Eve.
If you’re currently bullish on precious
metals, you might want to consider what the data say gold bought this month
will be worth by year’s end.
Regardless of whether gold follows the
monthly trend in March, the point is to buy during the next downdraft, whenever
it occurs, for maximum profit. And keep your eye on the big picture: gold’s
fundamentals signal the price has a long climb yet ahead.
Everyone should own gold bullion as a hedge
against inflation and other economic maladjustments… and gold stocks for
speculation and leveraged gains.
Disclaimer: This
article was posted with the permission of a third-party contributor
and the opinions contained therein do not necessarily reflect
those of Smallcappower. Smallcappower does not endorse any investment
advice provided by these third-party contributors. Please consult
your investment advisor before making any investment decisions.
Ubika
Corporation and its divisions Smallcappower, Ubika Communication and Ubika
Research are not registered with any financial or securities
regulatory authority in Ontario or Canada, and do not provide nor claims
to provide investment advice or recommendations to any visitor of this site or
readers of any content on this site. – See more at: http://www.smallcappower.com/posts/small-cap-power-disclosure#.UoJQkZEq_vw
