How I Worked Out the Best Months to Buy Gold Stocks

How I Worked Out the Best Months to Buy Gold Stocks

Want a great chance to make some money?

Let me tell you…

Gold stocks can provide awesome returns in the stock market.

One thing: this line of thinking comes with a big caveat. Gold stocks are volatile beasts!

Yep — they’re not for the fainthearted.

But today I’m going to let you in on a little secret…that I don’t think anyone else is writing about in Australia…at least as far as I know.

What is it?

The best time to buy gold stocks — statistically!

Let me put this opportunity in some context first…

The last three weeks have been quite frustrating for us gold investors.

Gold was over $2,460 an ounce (oz) in Aussie dollar terms at the start of the month.

It fell $100/oz from 10–17 June.

Things turned even worse very quickly after the Federal Reserve met last week.

The gold price fell more than US$90/oz in the two days after the meeting…one of the biggest daily drops for 2021.

Quite a rough tumble!

Australian gold stocks have experienced a battering since the start of the month, falling 10%.

You could be forgiven for believing that you should give up on gold and gold stocks.

After all, they’ve had a rather bad run since last September to March this year. The recovery since the beginning of March seems like just a dead-cat bounce, right?

It sounds all bleak, but it’s not.

Take a deep breath. Let me frame it in a different context…and a better one.

Gold is 7% higher, and gold stocks are still 12% above the lows in early March.

Now here’s the most important bit…

I analysed the monthly performance for gold in Australian dollar terms.

Let me show you why there’s likely money to be made from now!

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The best months to buy gold stocks

Trader and commentator Jeff Clark did a study that showed the best months to buy gold, historically, are after the most brutal declines in May and late December.

This is because the gold price rises strongly in January–February and July–September.

Here’s the thing: Jeff Clark is a yank!

We’re Aussies. And I could not find a similar study in Australian dollar terms.

I decided to get to work analysing the monthly performance for the gold price from 2000–20 for us.

As far as I know, I’m the only one to do this!

Check out the results…


Monthly Gold Price Performance

Source: Thomson Reuters Datastream

[Click to open in a new window]

I calculated the average monthly return of gold, the volatility of the monthly return, and the number of years during the period where the monthly return of gold is positive.

The results show the gold price is strongest in January and August, rising 3.13% and 3.2% over the month. It’s weakest in March, June, and September when it falls -0.96%, -0.68%, and -0.82%, respectively.

The months of February and September are also good for gold as they delivered positive average returns of 1.63% and 1.66%, respectively.

However, it’s more unpredictable in September, as the gold price tends to start declining later in the month.

The months of February and August are when you’re most likely to see the gold price deliver positive returns (71.4%), while March would be the least likely month to see positive returns (23.9%).

Surprisingly, November is also a good month to see positive returns on gold (61.9%).

I find it quite surprising that gold delivered positive average returns in November and negative average returns in June.

My recent experience is that June is the beginning of the rally in the gold price, while November is normally when gold is brutally sold down.

So which months are best for us to buy gold?

My study suggests that the best time to start buying gold and gold stocks would be in late April and late October. This is because buying in late April allows you to enjoy a rise in May, a slight decline in June followed by a strong rally from July–September.

Naturally, past performance is no guarantee of future performance. But I believe this analysis pulls the odds in our favour.

Buying near the end of October historically allows you to make gains in November–February.

Conclusion? You have not missed the right time to buy into gold investments now. Rather, you’re staring at the opportunity now.

What are you waiting for? I’ve just put my top five gold picks and my unique valuation methodology down in the special report section for new subscribers to my service Rock Stock Insider.

Regards,

Brian Chu Signature

Brian Chu,
Editor, The Daily Reckoning Australia

PS: Discover what is probably the easiest way to start investing in gold in Australia. In fact, it’s as easy as buying a book on Amazon! Click here to read the FREE report.