Today’s AM fix was USD 1,284.50, EUR 959.16 and GBP 762.99 per
ounce.
Yesterday’s AM fix was USD 1,295.00, EUR 966.92 and GBP 767.36
per ounce.
Gold fell $14.60 or 1.13% yesterday to $1,282.10/oz and silver slipped
$0.25 or 1.21% to $20.37/oz.
Seasonal Gold - Gold’s Strongest Months Are August, September, November
Palladium was the only one of the major precious metals to rise in July,
climbing 3.2% for its sixth month of gains. Platinum was down 1.8%, silver
down 3% and gold down 3.4%.
Silver for immediate delivery was little-changed in London at $20.40 an
ounce. Platinum fell marginally and was at $1,463/oz. Palladium was
marginally lower at $871/oz and remains near the 13 year nominal high of
$889.75/oz.
Gold In U.S. Dollars - 10 Years
Gold is marginally higher in London this morning and overnight in Singapore,
gold remained in a tight range between $1,280/oz and $1,285/oz. With
Asian trade limited to a narrow band of just $5.00, volumes traded in late
trade on Globex were low at just 9,000 lots (GCZ4).
Futures trading volume in London declined and was 31% below the average of
the last 100 days. Traders are waiting for the non farm payrolls data later
today.
The jobs number is expected to be good after the positive surprise that
was the GDP number. The GDP number has rightly been questioned as the growth
in inventories contributed 1.66% and likely greatly exaggerated the strength
of the U.S. economy in the 2nd quarter.
Markets are jittery and global stock markets are seeing losses with all
U.S. indices down yesterday and Asian and European indices down today.
Economic and trade war with Russia, conflict in the Middle East and the risk
of contagion in Portugal and from Argentina’s default are weighing.
Institutional money is being allocated to gold again as seen in the ETF
numbers. Gold
ETFs saw their largest monthly inflow in July since December 2012,
according to Reuters data, having added 7.4 tonnes to their holdings. Gold
ETP holdings hit a four-year low in mid June at 1,491 tonnes, but have since
seen some inflows.
Premiums for gold
bars in India remain near recent lows due to weak domestic demand. The
premium on Wednesday fell to $5-$6 per troy ounce compared with $10 per troy
ounce during the last week.
Gold prices have been in lockdown in a range bound month. The spread
between July's high and low was just $57.54. This is the narrowest in seven
years - the June 2007 range was $54.70. This was right before the global
financial crisis.
In 2007, gold began to move up aggressively in September (see chart
above). On September 1, it was trading at $672/oz. By early March 2008, it
was over $1,000/oz - for a gain of nearly 50% of just 7 months.
Were gold to replicate the gains seen in that period in the coming months,
gold would trade over $1,900 and close to new record nominal highs by the 2nd
quarter of 2015. The real record high, adjusted for inflation, is of course
$2,400/oz. We continue to believe it will be reached before 2020.
Global Conflict and Currency Wars a Threat to Economies and People
The New Cold War risks devolving into actual conflict between Russia and
Western powers. We are in the early stages of trade, economic and currency
wars. Competitive currency devaluations were a precursor to World War II
and actual conflict is a real risk now. Complacency is rife among financial
advisers, brokers and bankers and the public is being lulled into a false
sense of security ... again.
It remains prudent to hope for the best but be prepared for less benign
scenarios.
Gold’s Strongest Months Are August, September, November And
January
The summer months frequently see seasonal weakness as has been the case in
recent years and since gold became a traded market in 1971. Gold and silver
often see periods of weakness in the summer doldrum months of May, June and
July.
Gold Seasonal - Monthly Performance and Average (10 Years)
Gold’s traditional period of strength is from early August into the autumn
and early winter. Thus, early August is generally a good time to buy after
the seasonal dip.
Today, we commence August trading and August along with September and
November, are some of the best months to own gold. This is seen in the charts
showing gold’s monthly performance over different time frames - 1975 to 2011,
2000 to 2011 and the Bloomberg Gold Seasonality table above from 2003 to
2013.
Late summer, autumn and early New Year are the seasonally strong periods
for the gold market due to robust physical demand internationally. This is
the case especially in Asia for weddings and festivals and into year end and
for Chinese New Year when voracious China stocks up on gold.
Gold’s weakest months since 1975 have been June and July (see
tables). Buying gold in early August has been a good trade for most of the
last 34 years and especially in the last nine years, averaging a gain of
nearly 13% in just six months after the summer low.
Thackray's 2011 Investor's Guide notes that the optimal period to own gold
bullion is from July 12 to October 9. In the previous 25 years, gold bullion
has outperformed the S&P 500 Index by 4.7%.
Conclusion
Gold’s ‘summer doldrums’ period is coming to a close. Traditionally seasonal
factors often result in weakness in the precious metal markets, particularly
in June and July creating an attractive buying opportunity.
The data is compelling but it is important to realise that the seasonal
data is just another indicator. Gold’s recent weakness could continue in the
coming months. Therefore, short term speculation should be avoided in favour
of long term investment diversification.
Investors should, as ever, avoid attempting to time the market and
consider cost averaging their purchases. This way they protect themselves
from market falls and also from buying again at much higher prices.
Absolutely nothing has changed regarding the fundamentals driving the gold
market. We are confident that gold, and particularly silver, are still in
long term secular bull markets likely for a 15 to 20 year duration.
Owning physical coins and or bars in your possession and owning physical
gold and silver in allocated and most importantly in segregated accounts will
continue to protect and grow wealth in the coming years.
