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It’s a pretty bold statement to predict what the price of gold will be on a certain date. Naturally, I don’t think I can really tell the future, but here’s what I can do: measure gold’s seasonal behavior since the bull market started in 2001 and apply those trends to this year’s price.
Many gold investors know that the price tends to be soft in the summer and then rise in the fall. While gold has powered to record highs this summer, I can demonstrate that in spite of this atypical pattern, $1,800 gold sometime this autumn is a very reasonable target.
Here’s how: The following table records the summer low in the gold price in every year since 2001. I then list the peak that occurred later that fall, as well as the year-end price. Check out the percentage gains.
You can see this pattern has registered a healthy – and in some cases spectacular – gain every year. Even in the waterfall selloff of 2008, gold managed to climb higher from its summer low.
There are some other compelling facts about this table. First, the fall high in the gold price occurred in December 60% of the time, and in November or December 80% of the time. Second, based strictly on past price behavior, there’s a 60% chance our July 1 low of $1,483 is the low for the summer.
From this, we can make some projections. If gold were to match the average 20.7% rise from our July 1 low (assuming that low holds), we would hit $1,790 this fall, probably in November or December. And the price of gold on December 30 (the last trading day of the year) would be $1,729.
In fact, given that there’s no end in sight to the sovereign debt issues here and abroad (regardless of the resolution to the U.S. debt talks), I’d bet the average gains are exceeded. If gold matches the greatest fall and year-end increases, we’d see $1,980 and $1,925, respectively. That may look like an aggressive move from here, but consider that those levels are still far below any inflation-adjusted price from the 1980 peak. Even the smallest climb, 10.6%, would leave us at $1,640, meaning current levels aren’t the high for the year.
Here’s the same data for silver:
You can see that, as expected, silver is more volatile. Yet, other than 2008, the general trend still holds. The metal recorded higher prices every fall, and those highs occurred in November or December 80% of the time.
If silver were to match its 34.6% average autumn rise, we’d hit $45.56 sometime this fall (assuming the July 1 low of $33.85 holds), and end the year at $42.41. However, given that we’ve already exceeded these prices this year, and that silver is increasingly being used as a monetary metal, I think we’ll see higher levels. A 50% rise would take us to $50.77, and matching last year’s biggest jump of 76.8% would get us to within a few pennies of $60. Either way, assuming no major reversal, $40 silver shouldn’t be the high for the year.
But these are just numbers. In the big picture, I believe gold and silver must move higher. Fiat currencies – especially the euro and U.S. dollar – haven’t seen the full impact of their devaluation. The debt-and-deficit dilemma plaguing many countries can’t be rectified overnight. In my view, there’s a long way up for precious metals for the simple reason that there’s a long way down for most currencies. Regardless of where the prices of gold and silver end up later this year, I suggest denominating your savings in the time-tested assets that will preserve your purchasing power. The gains in these charts mean nothing if you don’t actually buy some gold and silver to protect your assets. |
It’s a pretty bold statement to predict what the price of gold will be on a certain date. Naturally, I don’t think I can really tell the future, but here’s what I can do: measure gold’s seasonal behavior since the bull market started in 2001 and apply those trends to this year’s price.
Many gold investors know that the price tends to be soft in the summer and then rise in the fall. While gold has powered to record highs this summer, I can demonstrate that in spite of this atypical pattern, $1,800 gold sometime this autumn is a very reasonable target.
Here’s how: The following table records the summer low in the gold price in every year since 2001. I then list the peak that occurred later that fall, as well as the year-end price. Check out the percentage gains.
You can see this pattern has registered a healthy – and in some cases spectacular – gain every year. Even in the waterfall selloff of 2008, gold managed to climb higher from its summer low.
There are some other compelling facts about this table. First, the fall high in the gold price occurred in December 60% of the time, and in November or December 80% of the time. Second, based strictly on past price behavior, there’s a 60% chance our July 1 low of $1,483 is the low for the summer.
From this, we can make some projections. If gold were to match the average 20.7% rise from our July 1 low (assuming that low holds), we would hit $1,790 this fall, probably in November or December. And the price of gold on December 30 (the last trading day of the year) would be $1,729.
In fact, given that there’s no end in sight to the sovereign debt issues here and abroad (regardless of the resolution to the U.S. debt talks), I’d bet the average gains are exceeded. If gold matches the greatest fall and year-end increases, we’d see $1,980 and $1,925, respectively. That may look like an aggressive move from here, but consider that those levels are still far below any inflation-adjusted price from the 1980 peak. Even the smallest climb, 10.6%, would leave us at $1,640, meaning current levels aren’t the high for the year.
Here’s the same data for silver:
You can see that, as expected, silver is more volatile. Yet, other than 2008, the general trend still holds. The metal recorded higher prices every fall, and those highs occurred in November or December 80% of the time.
If silver were to match its 34.6% average autumn rise, we’d hit $45.56 sometime this fall (assuming the July 1 low of $33.85 holds), and end the year at $42.41. However, given that we’ve already exceeded these prices this year, and that silver is increasingly being used as a monetary metal, I think we’ll see higher levels. A 50% rise would take us to $50.77, and matching last year’s biggest jump of 76.8% would get us to within a few pennies of $60. Either way, assuming no major reversal, $40 silver shouldn’t be the high for the year.
But these are just numbers. In the big picture, I believe gold and silver must move higher. Fiat currencies – especially the euro and U.S. dollar – haven’t seen the full impact of their devaluation. The debt-and-deficit dilemma plaguing many countries can’t be rectified overnight. In my view, there’s a long way up for precious metals for the simple reason that there’s a long way down for most currencies. Regardless of where the prices of gold and silver end up later this year, I suggest denominating your savings in the time-tested assets that will preserve your purchasing power. The gains in these charts mean nothing if you don’t actually buy some gold and silver to protect your assets.
[Using this kind of analysis, BIG GOLD editor Jeff Clark was able to boost his mom’s IRA by 90%. You can do the same thing!] |
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