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 updated June 19, 2007
Bargain Buying: Use Seasonal Price Trends to Your Advantage
USAGOLD-Centennial Precious Metals
One of the more intriguing
curiosities of the current bull market in gold has to do with
the annual buying opportunity which seems to crop up in the depths
of the summer doldrums.
To make a long story short,
gold purchases made in June and July proved very profitable by
year-end, as shown in the annual price charts (see right) and
explained by our following evaluation.
As depicted in the graph below,
the end of a 20-yr bear market in gold was marked in 1999, and
this new bull market birthed in 2001.
20 Year Gold Price Chart;
Secular Bear Becomes Secular Bull
In focusing especially upon
the particular consistencies revealed during each of these past
six bullish years of the new trend we can snatch some semblance
of order and direction amidst the general noise.
Our first observation is that
despite straddling the very middle of the year, pricing patterns
in June and July have nonetheless, with near perfect consistency,
allowed investors the very latest-possible opportunity to buy
gold at levels still below the average annual price for
that year.
And the key point here is that
one needn't attempt to further refine their weekly or daily timing
of action beyond that which is obtained by blind action -- meaning,
any random assortment of purchases throughout June and
July on average proves to be a fruitful maneuver by year-end.
The simplicity of this seasonal
trend is a useful insight for bargain hunters. In fact, over
the past 35 years, this trend holds on average, and over
two-thirds of the average annual gains have been registered
between August and December.
For the most-recent six years, subsequent seasonal price-gains
registered from August until year-end for any random assortment
(i.e., average) of gold purchases made during these special two
doldrum months of June and July, as demonstrated from 2001 through
2006, have averaged 10.6 percent -- representing an impressive
25.4 percent when annualized for the remainder of the
year.
This certainly turns that old
Wall Street adage, "to sell in May and go away," completely
on its ear.
The accompanying annual price
charts tell the graphic story (see right)...
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