Jeff Clark, Senior Precious Metals Analyst, GoldSilver
MAR 7, 2017
(This update from Jeff Clark also includes recent developments on the themes he's been covering in the GoldSilver newsletter.)
It’s a rare gem when you can look at history and reliably pinpoint a time that is the best buying opportunity of the year.
But that’s exactly what we have with gold.
We tallied the average monthly change in the gold price from 1975 (the year gold was legal to own again in the US) to present. Here’s what we found.
Since 1975, the gold price has fallen more in March than any other month. Meaning it is one of the low points of the year and thus a good time to buy.
To be clear, this is the average performance over the past 42 years. Obviously there were years when the price bucked this trend. Also, this data measures the gain/loss from the last day of the prior month to the last day of the current month; it does not measure intra-month performance (you can see average daily performance here). But historically speaking, March has been the best month to buy gold.
You’ll notice that after March, the gold price tends to be relatively flat for the next four months. You’ll then see it typically rises every month for the remainder of the year. What this means is that if the price drops below the March low anytime between April and July, it may be your last chance to get a good price for the rest of the year.
On average, this historical data sends a very clear message:
• The next 30 days are likely the best time of the year to buy gold.
Does this historical trend hold true for silver? Not really…
You’ll first see silver’s greater volatility. You’ll also notice it does not necessarily track what the gold price does every month—sometimes it does the opposite.
March is typically a weak month for silver, but on average doesn’t fall as far as gold. The best months to buy silver throughout the year are June, August, and October.
March might end up bucking the historical trend this year, though, as through February 24 the price had risen nine consecutive weeks. It hasn’t done that since May, 2006. So it wouldn’t be surprising to see silver fall this month.
Overall, if you need more metal, this data gives you some insight into when you are likely to get the best price for the rest of the year.
Do you want or need more bullion? History says that the one of the best buying opportunities of the year is these next 30 days. Prepare to pounce.
Gold Theme Updates
We continue to track the themes we’ve written about in the newsletter. Here’s the latest developments that impact your investment in real money…
Survey of 200 money managers worldwide shows they think gold is undervalued (according to the Bank of America/Merrill Lynch monthly global fund manager survey). These managers control more than half a trillion dollars in investment assets—and now they’re bullish on gold. Reasons include worries about inflation, stagflation, and global protectionism, and the belief that gold is the best insurance. They also believe that gold is undervalued at anything less than $1,300 an ounce. The last time these mainstream managers thought that was in January 2009—and the gold price rose roughly 120% over the next 32 months.
More than 20 internet-based service providers have launched gold-backed financial management products so far in China. Sellers of gold-backed financial products are expanding their online sales channels and attracting more investors to the precious metal. Tencent Holdings is one example… the company enables users to give digital red-packets of physical-backed-gold that can be transacted in real time. These types of services will really appeal to millennials.
Gold coin, bar, and medallion sales at the Perth Mint more than triple over last fiscal year, to a record 16.22 million units. Their annual report also states that the outlook for gold is “very positive” given geopolitical tensions and the potential for inflationary pressures to start emerging.
Kyrgyzstan’s central bank wants every citizen to diversify into gold. Governor Tolkunbek Abdygulov says his “dream” is for every one of the 6 million citizens to own at least 100 grams (3.5 ounces) of the precious metal. Why? “Gold can be stored for a long time, and despite the price fluctuations on international markets it doesn’t lose its value for the population as a means of savings.” The central bank has offered bars directly to the population for two years, but only about 4,500 ounces have been sold. “I want to speed that up… we are hopeful that our country’s population will learn to diversify its savings into assets that are more liquid, and more importantly capable of retaining their value.”
GLD is now Sharia compliant, which will allow investors in Muslim-majority countries to buy shares. The Islamic finance market is worth about $2 trillion, so the potential for a jump in demand is certainly possible. It’s more likely a long-term catalyst than short-term, but the door is now officially open.
Armenia is building a gold-refining plant… the country produces 4-5 tonnes of gold every year, and after the launch of new equipment by Lydian International annual output is expected to reach 10-12 tonnes. The goal of the refining plant is to cater to the country’s growing domestic demand and also enable Armenia to sell its own gold bars at the London Exchange.
Uganda will launch its own gold refinery, to process gold that the country still extracts via rudimentary means. African Gold Refinery will process high-capacity gold for the first time, allowing Uganda and the Great Lakes region to sell gold on the international market—and reap hundreds of millions of dollars annually in potential revenues over the coming years.
“We firmly believe long-term asset holders should overweight gold in their portfolios, particularly against a backdrop of economic and political uncertainty,” says Juan Carlos Artigas, Director of Investment Research at the World Gold Council. He says the central bank in Turkey allocates “13% to 15% of our total reserves to gold.” Imagine the impact if everyone followed this strategy.
By 2020, silver demand will grow 32% for photovoltaic (PV) cells and as a catalyst to produce ethylene oxide. The Silver Institute says together these two sources of demand will account for a whopping 120 million ounces per year of consumption on average between now and 2020. Add the four years together and they expect consumption to reach almost 600 million ounces for these two sources alone.
Miners that don’t invest in growth now will hit a “production cliff” by 2021, says National Bank Financial analyst Steve Parsons. He estimates that it typically takes about four years to engineer and build a mine. And he says that between 2021 and 2025, output for the 17 gold miners it tracks will plunge by 34%. See our original article on just how bad the coming supply crunch for new metal could be.
Recent Product Releases
GoldSilver has released a number of new products in the past 30 days. If you missed any of these, or are looking for the latest release, or just want a way to diversify your physical holdings, you can check them all out here (click on the link to view the product and to order):
1 oz Canadian Lynx Silver Coin (2017)
5 oz Effigy Mounds America the Beautiful Silver Coin (2017)
10 oz Canadian Silver Magnificent Maple Leaves Coin (2017)
25 gram Canadian Gold Maplegram (2017)
1 oz Canadian Gold Elk Coin with Assay (2017)
1/10 oz Austrian Philharmonic Gold Coin (2017)
British Gold Sovereign Coin (2017)
1 oz PAMP Suisse Gold Bar
PAMP Suisse Gold Bar (Lady Fortuna):
Perth Mint Gold Bars: