Guest Post by John Rubino
This has been a uniquely boring stretch for gold and silver – especially considering all the things going on in the world that ought to light a fire under precious metals. In just the past few weeks, the US started a global trade war, Italy elected a populist government, emerging markets descended into yet another crisis, and inflation has risen from the dead – all of which would be expected to spook normal financial markets and send capital pouring into safe havens. But not this time, which leaves precious metals under the control of seasonal factors that have over the years generated the “sell in May and go away” rule-of-thumb.
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So when do the summer doldrums end? Based on recent history, December is a pretty good bet. The arrows on the following chart mark the beginning of each year since 2014. Note how gold’s price frequently starts moving up either then or a few weeks before, in early December. This seasonal strength is due to Asian buying in anticipation of weddings and harvests, and though you’d think traders would anticipate – and therefore cancel – the cycle’s impact, it still seems to operate.
Prior to 2014 the pattern was slightly different. Here’s a chart from Casey Research showing gold’s average performance for each month between 1975 and 2013. September was by far the best month to buy, with January the second best, implying a eight-month window beginning in July in which buying was rewarded with at least short-term gains.
If the second pattern re-emerges, then we really don’t have long to wait at all. Maybe one more month and at most three, and gold bugs can start having fun again.
As always, though, deciding when to buy precious metals is just the first in a series of challenges. Choosing the right dealer is paramount (see here for a list of reputable ones), followed by whether to take delivery and store the metal at home or seek secure vault storage for gold and silver.
And then there’s the bullion vs mining stock question. The former is money which will hold its value over long periods of time (thus preserving your purchasing power) while the latter are investments that can rise by multiples of their original cost or disappear without a trace. Jay Taylor’s newsletter is a good source for intelligence on the explorers, the riskiest and potentially most profitable segment of the mining market.
We just surpassed the “feds” target of 2% inflation 2.9 this am.
So, do we hear them shouting success? No, but mabe Joe sixpac will catch on soon to the fraud. Bullish for the metals.
Obviously just seasonal factors involved:
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Yep. Sideways pattern, vs. a slow steady climb the last 5 years, true.
A little personal history.
Sometime around ’96-97 if memory serves correctly, a 1 oz. coin was bought for $400.
A year later spot dropped to $250.
No more coins, thanks very little.
Then the dot com crash.
Spike to $800.
Sideways for a few more years, plus or minus $100, give or take.
Then the housing market bubble found its pin, resulting in a steady climb, at one point spot reaching close to $2k.
Then a reversion to the mean where we’ve seen sideways chart shown, in a range from $1050 to $1450 spots.
Not an investment.
Wealth preservation.
So, that same $400 in cash, if saved since ’96, has eroded purchase power.
That coin, if redeemed for funny money, at current spot prices, not only held value but multiplied the number of reserve notes that are backed by nothing but a promise.
A promise to erode even further.
Other investments in the search for yield perform better in the same time frames? Certainly.
Ride Amazon or Tesla, or Facebook.
When that train leaves the tracks, and plunges south into a ravine, a scant few will know precisely when to exit stocks, bond, and Fiat, and avoid the carnage. Good Luck.
Storm clouds on the horizon.
FOMO has a gang of players putting money with the shooter. He’s on a roll. But eventually, craps come up on the bones, or seven loser, when trying to make a five point, begging to hit big-time.
Not suggesting go all in on metals. But, dear prudence, a 10-15% of net worth is an insurance policy to prevent complete catastrophic Wipeout when the excrement hits the rotatinal blades. Just sayin’.
In the end, to each their own.
One nitpick–the author says, according to the chart, that September and January are the best months to buy……those are the months that have seen the highest historical price spikes ( why would one BUY when the price is at its highest?)
March through June appear to be the time to load up and September the time to dump for profits……..
When it comes to PMs, people feel like poor old Charlie on the MTA: they may ride forever beneath the streets of Boston because the price may never return (ref Youtube: The Kingston Trio – M.T.A).