Seasonal Recycling in Gold

By: Adrian Ash | Wed, Jul 18, 2012
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Even paying July/August's top price for gold has averaged 5.1% returns by New Year's since 1968...

It's a hardy perennial for anyone studying the gold market. And with the British summer being more like November this year, very hardy perennials are just what is needed.

But will the gold price blossom on schedule?

Gold Price in Dollars: Average Performance (median)

Greener than George Monbiot's socks, we're happy to recycle this fact yet again. The gold price tends to display a seasonal pattern - rising in spring, slipping or flat-lining in summer, only to rise once more in the fall and then winter.

No, the pattern was shot in 2011 as we noted last July. But such profitable "summer sales" have occurred most frequently during longer-term bull phases, as we told the Financial Times in 2009.

For Dollar investors, buying gold even at the highest price in July or August has only failed three times to deliver a gain by year's-end since this bull market began in 2001 (extending a pattern we noted in 2010. Lehman's collapse threw 2008 out of sync). Indeed, buying gold regardless of price in July or August has paid off 20 times in the last 44 years all told - and delivered an average 5.1% profit even with the losses included.

Now, this is hardly the way to time a serious move into gold. Buying regardless of price? Just because history says the summer average rewards it by year's end?

Viewed as crisis insurance, however, gold comes at a cost - your premium being the price you pay when you take out your policy. Sensible home economics says you should look for best value. Only here, cutting your premiums needn't void your insurance.

Sure, the gold price could well go cheaper from here. But if it doesn't, and people scramble once more for the security, liquidity and diversification only a lump of rare yellow metal can bring, then the current lull could be offering insurance at summer sale prices.

And so far this year, gold's summer sale is looking utterly typical.

 


 

Adrian Ash

Author: Adrian Ash

Adrian Ash
BullionVault.com

Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK's leading financial advisory for private investors, Adrian Ash is the head of research at BullionVault, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

About BullionVault

BullionVault is the secure, low-cost gold and silver exchange for private investors. It enables you to buy and sell professional-grade bullion at live prices online, storing your physical property in market-accredited, non-bank vaults in London, New York and Zurich.

By February 2011, less than six years after launch, more than 21,000 people from 97 countries used BullionVault, owning well over 21 tonnes of physical gold (US$940m) and 140 tonnes of physical silver (US$129m) as their outright property. There is no minimum investment and users can deal as little as one gram at a time. Each user's unique holding is proven, each day, by the public reconciliation of client property with formal bullion-market bar lists.

BullionVault is a full member of professional trade body the London Bullion Market Association (LBMA). Its innovative online platform was recognized in 2009 by the UK's prestigious Queen's Awards for Enterprise. In June 2010, the gold industry's key market-development body the World Gold Council (www.gold.org) joined with the internet and technology fund Augmentum Capital, which is backed by the London listed Rothschild Investment Trust (RIT Capital Partners), in making an $18.8 million (£12.5m) investment in the business.

For more information, visit http://www.bullionvault.com

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Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events - and must be verified elsewhere - should you choose to act on it.

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