The price of gold has been on the rise for roughly 10 years now. This trend has brought a lot of investment demand into the market. Before this bull market started the demand mainly came from jewelry buyers. Not so anymore. Even foreign central bankers are net buyers of gold which is a major shift, since for years they have been net sellers. But what does all this mean to you and me? We need to look at the trends and ask ourselves if now is a good time to buy gold coins.
The following charts show what has gone in the price of gold for the last nine years. I got these charts from arabianmoney.net.
It is obvious that gold has closed higher every year since the bull market began. It is also clear that there have been ups and downs all along the way (sign of a healthy market). But what is most intriguing is that in eight out of the last nine years gold has risen in the last 4-5 months of the year and many analysts are expecting it to do the same this year. 2008 was the only year that this did not occur. This was due in part to liquidations in gold to cover losses in equities and in part to a rallying dollar due to investors seeking a safe haven from falling equities. Could this happen again in 2010.
It could if we see equities correct negatively in a major way, which would initially have a negative impact on gold, but ultimately losses in equities eventually seem to make gold rise. So I expect any correction in gold to be temporary.
It would seem to me that there is a pretty convincing case (based on these charts) for gold to rise in the fourth quarter of this year. Gold is currently at a nominal high but nowhere near a real high (based upon inflation from 1980 to present), which analysts estimate to be around $2,300 per ounce. Not to mention we have not seen a blow of top that usually occurs during the third phase of a bull market.
According to these charts gold’s rise in the last few months of the year (excluding 2008) have averaged 13.17%. That is a very nice gain for those that have capitalized on it. I think everyone should own gold as financial insurance, but that doesn’t mean that you can’t capitalize on growth too.
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Chief Market Analyst, ITM Trading