Gold is one investment worth investigating, as the precious metal is often regarded as a hedge against inflation. If you're considering adding some gold shine to your portfolio, historical data suggests that specific times of the year may be better than others for buying gold.
Best Month To Buy Gold
Historically, some months of the year are better for gold investment than others. GoldSilver, a precious metals investment company, analyzed daily gold price changes from 1975 to 2022. According to their data, the first half of the year sees only a slight 0.6% increase on average. However, the third quarter averages a plus 3.6% price change and a 1.5% price increase in quarter four.
If we break down the data even further, you can see that the gold price is usually the lowest in January before ascending in February. According to the site's analysis, the year's largest price drops on average take place in March (-0.8%), June (-0.2%) and October (-0.3%). As such, the best months and times to purchase gold are usually January, March, early April, mid-June and early July.
As mentioned, the price is lowest during January, preceding a price surge. If the pattern bears out, it would seem February is a bad time to invest right when gold prices peak. That may not be true, though, because, historically, prices rise again during the third quarter and toward the end of the year. However, if you can wait until March when prices decline, you may be able to "catch the dip" and secure a better price.
But as with any investment, timing the gold market is challenging, if not impossible. While looking at these historical trends can be helpful, always remember that past performance never guarantees future performance.
The lowest price of the year, historically speaking, is in January. But as the study points out, the price doesn't return to that gold cost at the start of the following year. That means the time leading up to January may also be advantageous for gold investing.
The worst month to invest is likely September, which experiences the largest price increase of the year (1.8%) on average. There is typically a slight correction in October (-0.3%) before the price slowly rises 0.7% and 1.1% for November and December, respectively.
The aforementioned trends are merely an analysis of historical data that is bound to change in the future. Like most investments, gold prices constantly fluctuate, reacting in real time to changes in the market. While you can use past trends as information to consider, monitoring the market movements, no matter the month or season, may be more useful.
Rather than trying to time the market, consider buying gold in small amounts regularly instead of making one large purchase. This strategy can potentially deliver a lower average price. Also, keep in mind that financial experts often recommend limiting your gold allocation to 5% or 10% of your portfolio. Of course, always seek the guidance of your financial advisor before investing in gold or other assets.
Not surprisingly, some older adults may be considering options like reverse mortgages, cash-out refinancing and other methods to help make ends meet. Buying gold may be one option worth exploring since gold has historically been a solid hedge against inflation. When the cost of living rises, the price of gold tends to go up as well.
Is now a good time to buy gold? Are there times in your life, or this year, when buying gold is more beneficial? Let's take a closer look at gold as an investment and when you should consider buying it.
Many investors add gold to their portfolios as a hedge against inflation and a store of value (an asset that retains its purchasing power without depreciation). Gold has also historically been a strong hedge during times of financial crisis. Many experts cite the best time to buy gold as when inflation or a recession is possible since the value of gold tends to rise during these times.
Research from the World Gold Council states that when the inflation rate outpaces interest rate increases like we're seeing, commodities like gold may outshine some traditional financial assets. When the value of the dollar decreases, people seek out gold and other safe and stable places to put their money to hedge against inflation.
Consider this: The 1970s was a decade of inflation, starting with an average interest rate of 5.84% in 1970 and ending with a whopping average rate of 13.58% in 1980. During the same period, the gold value soared from $35 per share to $850 per share, according to NASDAQ data.
Traditionally, gold buyers have been older investors, but investing in gold may make sense for younger investors. For example, if you're in your twenties to mid-thirties, you have roughly 30 years before you can retire. With plenty of time to save for retirement, you can risk more than an older person might, so gold may be a more attractive investment option.
Despite the appeal of gold as a safe haven, gold may be too risky for retirees who need income-producing investments, according to AARP. Additionally, gold can experience wild fluctuations in value within a short period or limp along for years. Older investors may benefit more from income-generating investments, such as stocks that pay dividends, municipal bonds and real estate investment trusts. On the other hand, some investors may consider a small amount of gold as part of a diversified portfolio and as insurance against a severe market crash, catastrophic economic problems, or even war.
According to GoldSilver, an online precious metals dealer, the best times of the year to purchase gold are in early January, March and early April, or from mid-June to early July. These conclusions stem from GoldSilver's analysis of the average performance of gold for every day between 1975 and 2021.
Notably, the research found there are seasons to buy gold before its price rises. On average, gold prices rise during the year's first two months. Gold prices then drop off over the spring and summer before climbing again in the fall.
Gold prices constantly fluctuate, as seen on any gold price chart. The price rises and falls in response to real-time trading behavior, so pay close attention to market movements online, looking for price dips to time your buy.
If you're looking for the best time to buy gold, understand that timing the market for the lowest price is difficult. A better approach may be to buy gold in small quantities regularly. By portioning out your gold buy, instead of making one large transaction, you might be able to buy at a lower average price to maximize your returns.
When considering the pros and cons of buying gold, it helps to understand what your goals are. If it's to diversify your portfolio or to hedge against inflation, then gold makes sense to pursue. But if you're an older American who is looking for income-producing investments or, simply, alternative sources of income, then gold may not beneficial.
Since 1975, the gold price has tended to drop the most in March. The daily chart above shows April might offer a slightly lower overall price, but history shows March is the month gold falls the most and is thus one of the best times to buy.
Historically, gold prices tend to slow down during the spring or summer, and they tend to start gaining ground again in the fall. On a cyclical basis, buying gold is typically cheapest in January, March, and mid-June to mid-July. By contrast, the fourth quarter tends to be the most expensive time to buy bullion.
However, some of the data is skewed by the fact that January offers the lowest prices for that calendar year. During periods when gold has seen extended periods of rising prices, it only makes sense that the first month of the year would represent the lowest prices, even if they are up considerably over the previous fall.
There are too many complexities that go into the gold market to explain simply. However, part of the cyclical demand for gold likely comes from global holidays where buying gold is traditional or increasingly part of the culture. This includes festivals like Diwali in India, which happens in the fall.
India and China are the two largest gold markets in the world, and demand for jewellery and bullion in those countries are significant price factors. Between the two, they account for nearly 270 tonnes of gold jewellery demand in 2019, over half of global consumption.
While investors in the west often turn to gold when the economy is uncertain or at risk of a recession, economic growth in these countries can mean higher gold demand as people convert more savings into bullion wealth.
There also tends to be more interest in the stock market in January. Known as the January Effect, markets may rise as people invest end-of-the-year bonuses in their retirement portfolios. The higher demand for stocks may mean slackening gold demand at that time of year.
Dollar Cost Averaging is an investment strategy that spreads out the risks of buying at any one moment in time. Rather than try to anticipate prices to buy low and sell high, DCA investing spreads out the purchase over several periods. For example, instead of investing $6,000 in gold all at once, you may prefer to invest $1,000 per month over a period of 6 months.
Bullion prices are likely more impacted by broader market factors than the time of the year, even if the calendar can have an effect. There are several market factors that can drive gold prices down, giving you an opportunity to take advantage of lower prices in a lull.
Similarly, a strong U.S. dollar will also keep gold prices low. Many investors turn to the yellow metal when there are fears about the stability of the dollar, so when the dollar is performing well against other international currencies, gold demand again takes a dip.
Supply shortages are increasingly a factor in precious metals, especially in silver markets, which are more heavily relied upon for industrial use. When more of a metal comes out of the ground each year, prices go down. The general trend is that new silver and gold supplies are becoming harder to find, but the discovery of new yields and the opening of new mines can temporarily shift that overall trend.
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