The markets have been jittery over the last couple of months. It would seem that the price of gold hasn’t quite settled. Global markets have been taking heavy knocks as the U.S. European and Asian markets showing loses in the last couple of weeks. The economic trade war with China, Russia’s meddling, Trumps Tweets and fake news have been weighing on the global gold price.
The number of gold ETFs had the largest inflow in the middle of the year. This would be the largest inflow of ETFs since December 2012. According to Reuters, institutional money was used to add 7.4 tons to their gold holdings. Gold ETFs reached their lowest level at 1,491 tons.
Gold bar premiums in the Indian Market reached an all time low due to a weak domestic demand. The premium fell to $6, which is $4 less that they were a week before. The spread in July-August was at $57.54, the narrowest margin it has been in seven years. In 2007, just before the financial crisis hit, the spread was $54.70.
Gold moved aggressively in September 2007. It was trading at $672/oz in September but that rose to $1000/oz by March 2008. If gold replicated the gains made during that period, gold would have traded for $1,900 by the end of season. When adjusted for inflation the price would have been $2,400. Analysts still believe that it is possible to reach this mark before the year 2020.
With the looming trade wars, conflict with other countries and warring currencies. Complacency is a problem in financial advisers, traders, broker or banks. It is still prudent to be prepared for the worst by hedging your money in gold and to watch the patterns in the gold market.
Gold usually goes through a period of weakness from May to July. This trend goes back to June,1975. Traditionally the gold market gets stronger from early August to November. This is particularly true for Asia as most weddings and festivals happen around this period. For the past 34 years, August has been a good time to trade gold. In the last nine years, the gold price has had an average gain of 13%.
According to Brooke Thackray’s 2011 Investor’s Guide, the best time to buy gold is fro. 12 July to 9 October. In the last 25 years, gold Bullion’s performance outstripped the S&P 500 Index by note than 4.7%.
Judging by the historical trends gold’s slump might be coming to a close. Going by historical seasonal data, gold’s weakness might be coming to an end. It is however, still important for gold investors to avoid speculation and look at gold as a long term investment. Investors should avoid timing the market and consider diversification and averaging their purchases this way, they are protected from unexpected sharp market falls and having to buy later at higher prices.
Nothing much has changed when it comes to the fundamental drivers of the gold market. However, analysts believe that gold will continue to be bullish for the next 5 to 15 years. Owning gold bars or gold coins in allocated or segregated accounts will continue to protect as well as grow wealth in years to come.
Sources used for this article are listed below: