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Simit Patel's  Instablog

Simit Patel
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I'm a precious metals and energy investor as well as a currency trader who combines analysis of geopolitics, monetary economics, energy technology, innovation cycles, Internet technology, and technical price patterns to develop trading and investing outlooks. I trade/invest in all timeframes --... More
My company:
InformedTrades
My blog:
Forex Trading Journal
My book:
Wealth Management in the New World
  • Seasonal Buying About to Kick In for Gold  0 comments
    Sep 5, 2011 12:56 AM | about stocks: GLD
    It's September, and if you're a gold bug, you know what that means: it's Indian wedding season time! Gold has risen each September since 2007, and from 2002 to 2007, gold averaged a 10% increase from the start of September to the end of October (source). So, from a seasonal/cyclical perspective, we're on the brink of gold's best time of the year.

    Of course while weddings create jewelry demand for gold, the true driver in gold's secular bull market is not jewelry demand but rather monetary demand -- meaning demand for a store of wealth. And so the global sovereign debt crisis, which remains completely unaddressed by the world's monetary authorities and is only growing, remains the true driving force. On that front there is no sign of public debt cancellation or even reduction, and so the outlook for gold remains wildly bullish, as many, including myself, have noted many times here on Seeking Alpha. Bernanke's two-day affair set to commence on September 21 will be the key central banking activity for gold bugs to watch this month, as we enter prime time in both gold's seasonal demand and in the ongoing sovereign debt crisis.

    In terms of price action, though, it is vital that gold reach new all-time highs soon -- preferably this week. If gold retraces from here, it is setting itself up for a pattern of falling highs -- a bearish sign. This could pave the way for a retracement all the way down to $1,650. In light of the fact that we are on the brink of greater seasonal demand, are seeing the global sovereign debt crisis continue to escalate, and have just witnessed gold sharply bounce off the $1700 level, though, I think waiting for further dips before accumulating is becoming unnecessarily risky.   

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Stocks: GLD
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