When you’re looking to increase your position in gold or silver bullion, getting the best possible price is always a smart strategy. The lower your costs, the higher your returns will be down the road. Timing the price of gold is notoriously difficult. As much as you may want to take advantage of a price dip now, there’s always the chance it could slip even lower. But anything can happen, and as a safe haven asset, gold is widely known for its popularity during times of international crisis or uncertainty.
One question that gold buyers often ask is whether or not there is a better time of the year to buy gold or silver bullion. They want to make sure they’re doing everything they can to buy low and sell high.
According to some data, the time of year can have an effect on gold prices. There are many other factors at play, and you should do your research about the market conditions that drive gold prices up or down. That said, if you’re hoping to time your bullion prices, data shows the calendar may play a role.
When to Buy Gold
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.
While January tends to offer the lowest prices in the calendar, March typically provides the largest drop in price during a calendar year.
Timing your gold investments is an imprecise art, and not every year will follow historical trends. It’s good to stay on top of news and price changes if you’re waiting for the right time to make a purchase.
Why Are Gold Prices Cyclical?
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.
When to Buy Silver
Gold isn’t the only bullion metal popular with investors, and there are plenty who want to know when to buy silver at the best price. Silver prices tend to follow a similar pattern to gold. January is usually the month when prices are lowest for that calendar year, but also a month when prices tend to rise quickly.
Outside of January, prices tend to slow down in June and August. Unlike gold, March is not an especially cheap time to buy silver.
Silver prices tend to show more volatility than gold, and price swings can be broader throughout the year. However, you’re more likely to get a better deal if you buy earlier in the year. Although silver does have years where it revisits its low point from the previous year, generally, the best prices are to be had earlier on.
Other Ways to Reduce Your Costs
Trying to time prices is far from foolproof, and it can be tricky trying to predict where bullion prices are going. The price at which you purchase is only one factor in your returns. There are other strategies for making the most of your money when you invest in precious metals.
Dollar Cost Averaging
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.
DCA investing aims to mitigate the impact of volatility. By spreading out your investments instead of a one-time purchase, you increase your exposure to dips. It also makes it less likely that you wind up investing a large sum during a price peak.
The one disadvantage with Dollar Cost Averaging to buy gold is that you can save on premiums by buying in larger quantities. That should factor into how you decide to invest.
Buying RRSP Gold
In Canada, gold can be included as part of your Registered Retirement Savings Plan. RRSPs offer a number of tax advantages:
- When you make an investment with your RRSP, you can deduct those funds from your taxable income, reducing your tax bill.
- Your savings are exempt from bankruptcy proceedings in an RRSP.
- You can withdraw early from an RRSP using certain programs designed to help you buy a house or return to school.
Buying gold with an RRSP can put more money in your pocket by reducing the tax you pay or increasing your refund. Although you can’t control the price of gold, using your RRSP can be a smart way to both buy gold and get more out of your income.
Buying Large Volumes
Any time you buy gold or silver bullion, you generally pay a premium above spot. This premium covers the costs of manufacturing, transporting, and insuring coins or bars.
Typically, when you buy precious metals in larger quantities, you can pay a lower premium, reducing the price-per-ounce that you wind up paying.
It can be difficult buying gold in higher quantities to get that discount, as gold prices are so much higher. However, if you’re looking for silver coins for sale, you should be able to buy in larger quantities and cut the cost you pay per coin. It’s an effective way of reducing your costs no matter where prices are.
Market Factors Affecting the Price of Gold
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.
Rising Stock Prices
Gold is seen as a safe haven that investors turn to when stocks have entered a bear market or when there is extreme volatility. Investors like a degree of certainty, and low volatility indicates a steadily growing economy.
When the market offers those conditions, investors are more likely to keep their money on the markets, leaving demand for gold relatively weak.
Strong Dollar
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.
The best time to invest in gold is before a crisis. Once uncertainty grips the markets, there will be a rush. You want to be in position already when events disrupt rising prosperity.
Supply
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.
Is Now the Time to Buy Bullion?
Gold prices have been relatively strong for the last several years, and as recession fears loom and geopolitical tensions rise, gold prices could go higher. However, trying to predict gold prices is rarely successful.
The challenge many investors face is that they want to increase their gold holdings and don’t want to wait years for the optimal time to buy. There are other ways you can reduce and control the costs of investing in bullion, such as buying with an RRSP or purchasing gold or silver in larger volumes.
If you’re getting into gold or silver investing for the first time, you can ask your bullion dealer more about these precious metals and the best ways to invest in them. We’ll explain more about what bullion is, which products make the most sense for your goals, and how to sell your gold investments when it’s time to cash out or adjust your position.
When you work with Global Bullion Suppliers, we want to make sure you’re confident about your investments, including how and when to buy gold. You can book a free bullion consultation to speak with an expert who can explain everything about how to buy and sell gold, how premiums work, and the differences between products.