Jeff Clark, Senior Precious Metals Analyst, GoldSilver
Can’t decide if you should buy gold now or wait?
Even though gold and silver have long-lasting qualities most other investments don’t, we all want the best price we can get. It’s only natural, and any good consumer will consider the timing of their buying decisions. It’s a question almost every investor asks: even if I get a good price now, will I be able to get a better price later?
Well, history has an empirical answer for you.
I looked at the historical data to see if I could identify the best period in the year to buy gold. Going into my research, I suspected January would be the best month. But what I found was interesting and points to other times when gold is a good investment.
To determine the answer, I calculated the average gain and loss for every day of the year since 1975 (when it was legal to buy gold again in the U.S.) and put it in a chart. Here’s what it shows:
You can see that, on average, gold tends to surge during the first couple months of the year. The price cools down through the spring and summer, then takes off again in the fall. This means that on a historical basis, the best times to buy are the beginning of January, early April or mid-summer.
You can also see that the price of gold, on average, does not historically revisit its prior-year low. The low of the year is indeed in January — but it’s the low of that year, not the prior year. Obviously, there were years when the gold price did fall. But there were also years it soared. After smoothing out all those surges, corrections, manias and selloffs, investors will get their best price at the very beginning of the year or the year before.
We ran the same data for silver, and here’s what we found:
It’s easy to see silver’s higher volatility. What also sticks out is that historically, silver doesn’t come close to touching the January low at any other time. The other best time to buy silver is in June.
As with gold, you’ll notice silver typically doesn’t come close to revisiting its prior year price, and that there were certain years when fell below where it started. But the historical data says that on average, investors will get their best price in early January or the prior year.
The main reason that January is a good time for gold investments is that it historically is the best month of the trading year. January is a month where investors often choose to realize stock gains and losses from the previous November or December so they can defer their tax liability. It’s also the month many investors choose to start new investment programs.
But the “January Effect” alone doesn’t explain gold’s performance. In fact, seasonality studies have shown that gold and silver outperform stocks more than 70 percent of the time in the month of January. Theories range from seasonal optimism to good old-fashioned superstition, but for whatever reason, early January is a great time to buy.
If you missed buying gold in January, when is the next best time to buy?
We broke the historical data down into months, and here’s what it shows:
Since 1975, the gold price has dipped the most in March. The daily chart above shows the price in April might be slightly lower, but historical trends show March is the month gold falls the most and is thus one of the best times to buy.
Unlike gold, March is typically flat for silver. The best months to buy silver throughout the year are June, August and September. Keep in mind, though, that the daily chart above shows that other than January, the lowest price point of the year is typically found in late June.
We also looked at which quarter of the year is the best time to buy gold.
Since 1975, the second quarter (April through June) has clearly been gold’s weakest and is thus the best time to buy. The third quarter (July through September) has been gold’s strongest.
There is one other factor to watch in the coming years. India is becoming one of the world’s largest consumers of gold jewelry, and their appetite is having an effect on the market price. Studies by Moore Research Center have shown that gold prices usually rise during the Indian wedding season, which runs from early September until early October. In other words, the best period in the year to buy gold in India is a pretty good time to own it elsewhere.
There are a couple conclusions we can draw from the historical record for buying gold and silver.
In the big picture, however, it’s less about snagging the exact bottom and more about how many ounces you own. Remember, gold is inversely correlated to other investments, including equities, so you want to have a meaningful amount of bullion before a stock market sell-off takes place. If you don’t, the price of gold could very well leave you behind, forcing you to pay not just a higher price but a higher premium.
(If you’re not sure where to start, try the tips in this article.)
Mike and I and everyone else at GoldSilver continue to buy gold and silver regularly. We’re not waiting. We’ll buy more if it falls, but the point is, we’re prepared now for whatever the future may hold. I hope you are, too. If not, I encourage you to buy physical gold and physical silver now to protect your family’s wealth.