When should I buy gold?

When considering the gold price, we often discuss it in regard to times when it perhaps outperformed silver, the S&P 500, or even when it broke new highs.

Rarely do we look at gold’s monthly performances and assess what it says about the best time to buy gold.

Last year many analysts and financial commentators dissuaded individuals from gold investment on account of the 28% fall in the gold price.

In contrast, now the price of gold is climbing, investment columns and reports are suggesting that holding some gold might not be such a bad idea.

Between 2000 and 2013 the price of gold has shown some interesting seasonality and trends that smart investors should be aware of.

This is the case in all currencies, but we decided to take a look at US dollar, euros and British pounds; the three currencies The Real Asset Co accepts for gold investment, to see what seasonality trends could be deduced.

It seems that December, or the beginning of January, has historically been the most attractive time to buy gold online, regardless of which currency you invest with. This is interesting and suggests that China’s rush to buy physical gold ahead of Chinese New Year does not affect the gold price, at least not in the month or so beforehand.

The price of gold often appears weak in the summer, as investors, central bankers and market participants take their summer holidays, before showing some stronger performance in the autumn.

Interestingly a broader study recently carried out by Jeff Clark of Casey Research, which looked at over forty years of gold price data, showed that the since March 1975, March has been the worst-performing month for gold.

But the worst-performing means the best time for buying. Let’s take a look at when the best time to buy is, in each currency.

Gold prices in US dollars show the most consistent gains in the early months of the year, whilst the autumn period also shows strength around the Indian wedding season.

The best time to buy gold with US dollars, according to our research between 200 and 2013, is July or October.

We would have assumed the summer months as well because, as we mentioned above, this is traditionally a quiet time in terms of volumes on the futures markets – the current main area of price discovery.

Gold buyers with pounds will notice the beginning of the year showing less consistent gold price gains as dollar investors, but that they are most rewarded by gold price trends in November with strong average monthly rises.

Unlike the USD gold price, the pound price tends to decline in December which perhaps helps those of you looking to buy your loved ones something special for Christmas.

Interestingly the euro price of gold presents more buying opportunities than those seen in USD and GBP. However, one can argue that gold investment can be a trickier business where the euro is concerned.

How can gold price trends help me?

Whilst the trends for gold prices are interesting to note, we shouldn’t plan our gold investing only around them. Trends can change and the figures for each month we look are an average taken over 12 years.

Smart investors might be well served to know what the price of gold has typically done in certain months, but ‘generally speaking’ doesn’t mean ‘always happens’.

As Jeff Clark points out, taking an average of something tends to mask all kinds of variations as the gold price reacts differently each month depending on if it’s a bull-market, a bear-market or even just mania out there.

There are few fail-safe ways to trade the gold price perfectly, hence why one of the most popular ways to build up a gold investment is to simply put the same amount into gold bullion each quarter. This is called ‘averaging in’; and means that when gold prices are higher you buy less, but also buy more when gold prices are lower. Averaging in means that you achieve a more attractive cost per ounce or kilo and are less exposed to short term volatility when you buy gold bars.

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