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Gold and Silver Correction Ahead?

Jeff Clark, Senior Analyst, 
MAY 27, 2020

Is a pullback due for gold and silver? They’ve admittedly had a nice run—as of May 22 gold was up 17.5% from its March low and silver 41.5%—so it wouldn’t be too surprising to see them cool off.

Add to that the seasonally weak summer months are right around the corner and a decline certainly seems possible.

Will seasonal patterns play out this year? If so we just might see a buying opportunity, which could be especially important for those that don’t have as much bullion as they want or missed out on earlier opportunities…

Average Annual Gold & Silver Performance

The following charts show the average cumulative gain and loss of gold and silver throughout the year. We averaged the daily price movements from 1975, when gold became legal to own again in the US, through last year.

Here’s the average daily price gain/loss for gold over the past 45 years. Notice the green circle.

Average Gold Price Gain/Loss Throughout the Year

Other than March and early April, late June and early July are, on average, the only other noticeable price dips during the year. For those years when seasonal trends play out, this would be the last chance to buy gold at a discount.

Here’s the same chart on silver. You’ll see the selloff in June is even more pronounced.

Average Silver Gain/Loss Through the Year

Late June, on average, has been a great time to buy silver. And like gold, if seasonal patterns play out, it’s the best price you’ll get for the rest of the year.

Will We See a Pullback in Metals?

Over the past 45 years, seasonal patterns haven played out roughly two out of every three years. In other words, while there’s a tendency to succumb to the selling pressure normally seen in June, there’s no guarantee.

And it’s true that “seasonality” may be less reliable in an extraordinary year like 2020. All it would take is another unexpected development surrounding the virus or the economy and gold could be off to the races again.

Of course there’s always ebb and flow. Even in bull markets prices frequently follow a “two steps forward, one step back” routine. Combined with the run-up since March it wouldn’t be surprising to see some weakness in the coming weeks.

The point of this research, though, is to be prepared. IF gold and silver take a dip, will you be ready to pounce and get what you want?

As much of our personal net worth that physical gold and silver already comprise, Mike and I will be turning over couch cushions if they sell off again. Because their ultimate destination is more certain than what they might do in the short term.