The month of September has historically been the strongest for precious metals. Since the start of the current bull market, gold has averaged a gain of 2.6% during the month of September. This is typically followed by a smaller gain of 0.8% in October and then a few more strong months in November, January and February. Taken together, we are exiting the weakest seasonal period for gold (Spring-Summer) and entering into the strongest seasonal period (Fall-Winter).
The following chart has been updated to include data through September of 2014:
Of course, seasonality is just an average and not a guarantee that past performance will repeat. However, physical buying typically increases during the back half of the year as India’s festival and wedding seasons kick in. Chinese purchases also tend to increase toward year-end. Traders take cues from these seasonal numbers and create additional buying momentum.
I believe it is wise to hold physical precious metals in your possession, especially as the geopolitical instability spikes and de-dollarization accelerates. This may be an opportune time to buy before gold and silver move into their strongest seasonal months. Despite the lack of action over the past few years, gold’s fundamentals remain strong and signal plenty of upside ahead.
In addition to holding physical bullion in your possession, you may also want to consider holding a few of the best-in-breed junior mining stocks. The greatest gains during uplegs can be found in this very volatile sector which is currently undervalued. In fact, mining stocks are offering some of the best entry points (relative to the metals) that we have seen during this entire gold bull market.
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