In my opinion, the best time to buy is, simply put, any time. Converting your fiat currency to gold (and silver) should be done for the asset’s wealth preservation attributes more so than as a speculative wealth-generating investment.
The best month to buy gold
Monetary inflation, when the supply of fiat currency increases at a rate greater than systemic wealth output guarantees that the value – or purchasing power – of fiat currency will decline. Moreover, gold has stood the test of time as a wealth-preservation asset.
That said, it is my belief that gold is currently undervalued as an asset and offers both speculative positive rates of return and wealth preservation qualities. If you are looking to generate positive investment returns on your gold purchases, it is worth looking at the price seasonality of gold.
As it turns out, there are certain months of the year in which gold throws off a better rate of return. I started researching and investing in the precious metals sector in 2001. It did not take long to figure out that gold’s best seasonal rate of return is late August through January.
What events affect the price of gold?
The chart above shows the price of gold from 2000 to the present, on a monthly basis. The black boxes show that the gold price has a tendency to rise in the last quarter of the year, particularly during periods of time when gold is in a bull cycle. In at least nineteen of the twenty-three years, the price of gold rose at least two of the months from August to January.
There is a causation for this seasonal pattern. Every year India is either the biggest or, next to China, the second-biggest importer of gold. While India imports gold (and silver) every month, the largest volume of gold importation is concentrated in the fourth quarter of the year.
This is because the fourth quarter of the year hosts India’s largest festival and wedding season. Diwali – also known as the Festival of Lights – is one of the most important festivals in Hinduism. It is based on the Hindu calendar month of Ashvin and falls between mid-October and mid-November.
It is traditional to give gold and silver jewellery as gifts during festivals and, more importantly, to Indian wedding brides. On average India imports 800-900 tonnes of gold per year (World Gold Council). The largest percentage of this gold is imported in August and September, ahead of the festival and wedding season. Gold importers start importing massive quantities of gold in August and September in anticipation of the higher demand from October through to January. This likely explains the outperformance of the gold price in August and September.
This chart quantifies the average monthly rate of return for the price of gold from 1975 to 2020:
The relative price outperformance in August and September is directly correlated with Indian seasonal buying patterns.
This chart shows a similar pattern:
The chart shows the average percentage change in the price of gold from the previous month in dollars, British pounds, euros and yen from 2002 to 2022. Note that January actually has the best monthly rate of return over the last 20 years. This may be due to those involved in investing and trading gold and silver expanding considerably during the precious metals secular bull market that commenced in 2001, particularly in the West.
January tends to have the best monthly performance for investments in general because that’s when money managers are inundated with an influx of investor cash (largely tied to retirement account funding). In addition, demand for gold in China, which now often surpasses India as the largest importer of gold, peaks ahead of the Chinese New Year, which is based on a lunar calendar and falls between late January and late February.
Buying gold during uncertain times
While I hold the view that timing gold and silver purchases are meant for wealth preservation purposes at regular intervals with the intent of “dollar cost averaging”, the empirical evidence does suggest that there are seasonal patterns that can be traded profitably.
The easiest, most seamless way to trade gold and silver on a short-term basis is with online precious metals platforms like Kinesis. As well as trading in and out of gold and silver on a real-time basis, Kinesis gold and silver asset currencies are backed by physical gold and silver, which you can take physical delivery at any time.
Dave Kranzler is a hedge fund manager, precious metals analyst and author. After years of trading expertise build-up on Wall Street, Dave now co-manages a Denver-based, precious metals and mining stock investment fund.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.
