Gold Pricing Trends – Can We Learn from the Past?

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Rich CheckanBy Rich Checkan of Asset Strategies International

“Is now a good time to buy gold?”

I can’t tell you how many times I have been asked this question in the past 20 years. The answer may be the only number bigger than our current national debt.

I believe there is no bad time to buy gold. I believe there is no bad price at which to buy gold. If your purchase of gold is for wealth insurance – a store of purchasing power, in a liquid form, for a financial crisis you hope you never have – there is no wrong price or wrong time to buy the world’s only real money.

Yet, there are a couple indicators as to when you may be able to acquire your wealth insurance at a fairly low premium… for those willing to look back at historical pricing trends…

Seasonality

Take a look at the following chart:

average gold price since 1975

Historically, September through February is when we see the most positive activity in the price of gold. The summer months are typically the doldrums for precious metals activity.

And, this is very easily explained…

  • India is typically #1 or #2 worldwide in terms of gold consumption. And, much of that is centered on buying activity associated with Diwali (this year, scheduled for the second week in November).
  • Also, and again we look to India, you have the wedding season which occurs in the fall. Gifts of gold and silver are the gifts of choice perennially.
  • Of course, the Christmas season is also a traditional time to purchase jewelry made of both gold and silver.

In all three cases, in order to gear-up for these consistent and predictable buying seasons, jewelers begin to accumulate gold and silver now… at the end of summer and the beginning of fall. Over the next few months, they will take this raw gold and silver and transform them into the finished pieces of jewelry to be bought later this year by consumers.

The better the economy… the better the sales.

Gold/Silver Ratio

We have been writing about the possibility of hitting the ‘Magic Number’ of 80 for several months. When it takes 80 ounces of silver to buy one ounce of gold, a clear and distinct pricing trend has developed pretty consistently over the past 20+ years.

I won’t go into the full analysis here. I wrote about it in detail last month. If you missed it, go here to see the full story. Or, if you rather hear it from our friends at The Non-Dollar Report, you can read about it here as well.

One week ago, we briefly hit the ‘Magic Number’ of 80. So, you may want to consider taking advantage of the current situation:

  1. The U.S. dollar is currently in a strong mini bull market amidst a clearly long-term bear market.
  2. We are currently at recent lows for both gold and silver as the seasonal buying activity is set to begin.
  3. We have touched our Gold/Silver Ratio ‘Magic Number’ of 80.

Here’s what I suggested you consider doing at this point when I wrote about this topic last month…

What should you do when the ‘Magic Number’ hits 80?

If the scenario above plays out and the pattern continues, here are three options to consider to take advantage of the situation…

  1. Insurance – If your overriding objective is to buy precious metals for insurance, consider buying some insurance – gold – here. Your premium may not be cheaper for your insurance policy for another 6-7 years.
  2. Speculation – Considering the volatile nature of silver, with wider swings to the downside followed by wider swings to the upside, profit-motivated precious metals buyers may consider purchasing some silver here.
  3. Trading – Historically, this is the most common use of the GSR indicator. Traders will look to the height of the GSR – near this ‘magic number’ of 80 – to sell some gold and buy some silver with the proceeds. Then, when the GSR hits new lows, they sell the silver and buy back gold.

As I mentioned at the start, I believe there is never a bad time to buy gold and silver. But, as you now know, some times are better than others. And, I believe now is one of those times.

By all means, take advantage of this opportunity to Keep What’s Yours!

Send me an email to [email protected]

 

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