August Buying Time for Gold

It is not always wise to invest in anything based on "seasonal" patterns, as 2008 showed pretty clearly. But that said, August is traditionally an excellent time to buy gold. And Raymond James analysts Brad Humphrey and Bart Jaworski pointed out that gold has tracked its seasonal pattern very closely this year — it did well in the winter, sold off in early spring and rebounded in May.

"This seasonality has historically provided excellent buying opportunities early in [the third quarter] as demonstrated in seven of the past eight years," they wrote in a note to clients.

They recommended that investors take advantage of any weakness in gold or silver prices over the next several weeks to buy equities. They pointed out that gold demand usually picks up from September onwards as the wedding and festival season in India begins, and investors return from holidays and get back to work.

The only year in the current gold bull market where the seasonality effect was totally lost was 2008, when the credit crisis kicked in and gold fell along with everything else. But that was an anomaly, they noted.

In terms of investing, Mr. Humphrey and Mr. Jaworski prefer gold equities to the gold exchange-traded fund, pointing out that equities have historically outperformed the gold price in the second half of the year, and the fundamentals look good right now.

They wrote:

Balance sheets have been repaired following the recent credit scare, interest rates are low and input costs have stabilized and in some cases are declining.

In a rising gold price environment, precious metal equities should be well positioned to expand margins and generate cash flow growth.

They also believe that the equities remain undervalued relative to the gold price.

Their current top picks include Yamana Gold Inc. (AUY), Eldorado Gold Corp. (EGO), Detour Gold Corp. (DRGDF.PK), Pan American Silver Corp. (PAAS), and Silver Wheaton Corp. (SLW). For investors with high risk tolerance, they recommend Detour and Golden Star Resources Ltd. (GSS).

Comments

[Jordan Lindsey:]

China continues to increase it's reserves at record levels as well as Russia is doing the same.


On Aug 11 06:46 AM Freya wrote:

> If India does not buy Gold because of Economic conditions and Gold's
> high price, who will act as a substitute?
>
> Curious because last I saw, India's imports were Down 50% year over
> year because of Price, economy and import surcharges.

Aug 11 09:08 AM

[blacksilver:]

yes and no
it all depends on what you want to do with it.
YES-if you want it to trade it daily or weekly to make money
NO-if you want to buy it for some type of insurance in case of a dollar collapse or inflation (long term)

On Aug 11 09:43 AM Mayascribe wrote:

> Isn't GLD still buying gold?

Aug 11 10:33 AM

[Mono:]

leavin etf moving to the physical. thats the drop.

GCBA sales also this month from central banks. floor around 918-920 back to 1009

Aug 11 11:22 AM

[marky5:]

One thing is true here:
"It is not always wise to invest in anything based on "seasonal" patterns, as 2008 showed pretty clearly." Buy gold in August? Why think so short term? What if you buy, but your gain isn't enough to cover your taxes and the cost to buy and sell?

Aug 11 11:50 AM

[H. T. Love:]

Yes. David Einhorn decided he wanted to move his holdings into real yellow stuff. He pulled his hedge fund completely out, converting to deliverables, and apparently moved it to a real vault with real auditablility.

HardToLove


On Aug 11 11:17 AM Freya wrote:

> Seems to me, I saw a recent SA article showing net Outflows both
> in interest and the amts of gold in GLD over the last few months.
>
>
> I think it was from an ETF overview, or something in that vein.

Aug 11 12:42 PM

[whidbey:]

This is like diving into empty swimming pools: the plan is good, but the results hurt like hell. I was recently bashed by SLW for no good reason, just absolution time I guess.

I suspect that demand for PM is like virtue, everyone has it, but no one uses it much. I always have some silver just for old times sake, but not to make money, mostly as a marker to show I am still gullible.

Sign me:" Want to believe but too bloody to move".

Aug 11 01:27 PM

[nmelendez:]

Nope, they take gold on lease from Central Banks. As a matter of fact if you ask to exercise your right for the gold they give you a litttle piece of paper that says you are the proud owner of one ounce(or what ever amount) of gold, not the physical stuff. :). No gold in this mine.


On Aug 11 09:43 AM Mayascribe wrote:

> Isn't GLD still buying gold?

Aug 11 02:28 PM

[capt Brian:]

Fine, nice article, wish it was the 1st one I have read with the same words. WHEN WHEN WHEN!!!!!..

I am in total agreement, but don't know when.

Capt. Brian

happy grins

Aug 11 02:46 PM

[Celcius:]

Because in times of war paper currencies are worthless. IMO Russia and China are stocking up on gold as an insurance policy against a US default. Which is inevitable unless eliminate Social Security, Medicare, Medicaid, and all the industrial subsidies.

The gold reserves will provide them with the financial means to sustain military operations. They are also stockpiling mineral commodities which would allow them to continue military production without having to initially control strategic waterways for oils supplies.

On Aug 11 10:27 AM market_movement78 wrote:

> yeah, China does keep on increasing it's reserves...not sure why

Aug 11 04:06 PM

[Kip Largo:]

India can do nothing but disappoint this gold season. China and Russia, but especially China will increase reserves, but thats on going, not seasonal.

I think you buy and sell quickly before news shows lack of india buying. Also, only pick miners ramping up production, so if you get caught with a lame gold season, you have a gold stock that still has potential on its own merit.

Also, talk of a second stimulus may drive gold regardless.

Aug 11 10:18 PM

[BioBoy:]

"Isn't GLD still buying gold?"

Does GLD actually buy much GLD? Take a closer look and you will find evidence that GLD doesn't hold nearly as much actual gold as it's supposed to...

Aug 12 05:10 AM

[sxsubr6:]

While Indians (not the Indian State) will continue buying Gold, the demand has really shifted from Jewelery (which is what Indians buy) to Investment in Gold Bars/ Ingots and Gold ETF by Hedge Funds.

China (the State and not the Chinese people) is increasing its Gold Reserves - by buying 100% of ~200 tonnes it mines within the country & not in the International Gold market. This year it beat the USA as the largest Gold producer.

Gold demand in tonnage was up 38% Q1 2009 year-on-year because Hedge Fund Investment demand increased 248% (595 tonnes in Q1 2009 vs 171 tonnes Q1 2008).
--Srikanth

On Aug 11 06:46 AM Freya wrote:

> If India does not buy Gold because of Economic conditions and Gold's
> high price, who will act as a substitute?
>
> Curious because last I saw, India's imports were Down 50% year over
> year because of Price, economy and import surcharges.

Aug 12 04:53 PM

[quezero:]

to prepare for the fall of the USD.
and to pick up the ball from the US sadly.

On Aug 11 10:27 AM market_movement78 wrote:

> yeah, China does keep on increasing it's reserves...not sure why

Aug 13 02:03 AM

[djj420:]

Yes, Einhorn redeemed his shares of GLD to take physical possession. But John Paulson is holding 31 million units of GLD (along with substantial positions in GDX and a few individual miners). I guess the tin-foil hat people are much smarter than him.

Aug 14 10:02 AM