While we’re convinced gold and gold stocks are destined for much
higher levels, buying when prices are low can mean the difference
between a double or triple and a ten-bagger... a week in Malibu vs. a
week in Milan.
There’s no secret formula to buying low, and we aren’t holding the
right hand of Midas, but there are periods when prices tend to be lower
than others. And if those tendencies play out, it can give us the
opportunity to snag a high-quality asset at a bargain price.
So, how do you get a bargain price? You cheat.
I think the secret to getting a low-cost basis on all your gold and
gold stocks is this: only buy on significant price pullbacks.
And this can be done without trading or using technical analysis.
I think there’s a good chance we can cheat this summer. For example,
here are the average monthly increases in gold since our bull market
began in 2001.
In our current 9-year bull market, June and August have seen the lowest
average return for gold, representing one of the best times to buy.
You’ll see that in the bull market of the 1970s, summer was also a good
time to buy gold.
What about gold stocks? Since 2001, June and July have been among the
weakest months and thus one of the best times to buy.
Obviously, these are price tendencies and not certainties. There were
Junes when gold was up, and some Julys when gold stocks were up.
Meaning, we’d avoid using these charts for trading purposes or in
anticipation of an immediate gain. Instead, use these “trendencies” to
look for possible price weakness. And if it arrives, use the
opportunity to add to your holdings and position yourself for the next
leg up in the bull market.
What are the odds of a correction in gold and gold stocks this summer?
►Since 2001, almost every precious metal stock, in every summer, has moved lower from its May high. This includes gold and
silver. There’s no guarantee this won’t be the summer of galloping
unicorn herds, but the record is hard to argue with.
Here are the buy zones I identified for gold and silver, based on a
tally of how far they’ve corrected from their May high to their summer
low, in each year of the current bull market.
You’ll see that the average price of all pullbacks in gold, from the
May highs to the summer lows, is 8.9%, and would take the price to
$1,126.98. That’s not to say this price will be hit, but it tips you off
that a fall to that level would not be out of the ordinary – and would
also be an invitation to buy. You can also see the smallest summer
decline, which we’ve already exceeded. We wouldn’t wait for the largest
drop to materialize; there’s a good chance you’d be left empty-handed
and chasing the stock higher.
Silver is naturally more volatile, allowing us perhaps a better
opportunity to buy low. The average summer decline for silver is 16.6%,
which would take the price to $16.39. However, the furthest its fallen
so far this summer is $17.36, meaning strictly on a historical price
basis, a 10% correction from current levels would be perfectly normal.
And again, an invitation to buy.
Whatever price (or prices) you select, I’d only use the charts to add to current positions, not for trading. The currency crisis Casey
Research believes is inevitable could strike suddenly again and will
eventually hit the U.S. dollar, and the last thing you want is to be
left standing on the sidelines if gold and gold stocks surge higher. In
our opinion, being completely out of precious metals in the middle of a
once-in-a-generation bull market would be a mistake. Instead, keep
adding to your savings every month and buy when it feels like you’re
See you in Milan?
Want to see the buy zones for all our recommended gold and silver
stocks? Our Summer Buying Guide is an invaluable resource for
buying low. And check out our just-released July issue, where a
respected bullion seller tells you why in the near future you may not
be able to buy gold, at ANY price. Try a risk-free subscription for only
$39 per year. Details