CHART: September and November "Best Months to Own Gold"
The increasingly positive investor sentiment towards gold is seen in the gold ETF’s growing to a record high of 71.729 million ounces on Friday. August inflows were 1.8 million ounces, up 3% and the biggest monthly rise since November.
Price data on gold in recent years, from 2000 to 2011 (see chart above), and over the long term, from 1975 to 2011 (see chart above), shows that September and November are the best months to own gold.
The summer months normally see seasonal weakness and it is thus a good time to buy on the seasonal dip. Gold’s traditional period of strength is from late August into the winter and early spring and the traditional March dip.
Gold’s seasonality is seen in the above charts which show how March, June and October are gold’s weakest months with actual losses being incurred on average in these months.
Buying gold during the so-called summer doldrums has been a winning trade for most of the last 34 years. This is especially the case in the last eight years as gold averaged a gain of nearly 14% in just six months after the summer low.
We tend to advise a buy and hold strategy for the majority of clients.
For those who have a bit more of a risk appetite, an interesting strategy would be to buy at the start of September, sell at end of September and then buy back in on October 31st.
This is obviously more risky as one will incur extra costs and risk the possibility of missing out on capital gains in October.
We caution that the monthly strength of gold in September and November while proven is not guaranteed and price falls in these months are also possible.
We also caution that a core position should always be held in gold in order to protect against the risk of currency devaluation or a systemic event.
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