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The Best Time to Buy Gold Sovereigns?

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Many investors and collectors of gold sovereigns have asked themselves "when is the best time to buy gold?" In this blog post, I will give my opinion on this question.

Just like anything else, gold price is driven by supply and demand. The demand can be divided into

1. Central bank demand

2. Investment (ETFs and exchange traded products)

3. Investment (physical, such as coins and bars)

4. Industry demand

3. Jewellery demand

As expected, a move in any of the above will affect the price of the yellow metal. This may suggest that moves are random at best and mainly effected of other markets' performance and money flows. However, gold demand from China and India corresponds to over 50 % of global demand (World Gold Council gold demand trends, published quarterly). Gold ownership is deeply ingrained in the culture of these (and many other) countries.

Basic knowledge of the Chinese and Indian calendars, customs and traditions reveals a great number of auspicious dates in August and September. During these times, weddings and festivities are plentiful. Gold jewellery being the gift of choice, this pushes the entire gold market. 

Plotting gold's performance since the 1970s when currencies were lifted off their pegs to gold reveals some interesting information. 

Last week alone, gold increased by 2.9 % in GBP terms, on news of tension between US and North Korea. The news may be temporary, but prices were likely helped by the fact that August shows a positive supply/demand curve. 

The historical performance is just one factor to take into consideration. However, I believe that there are many other factors that play into making these last weeks of August a prime time to add gold to your portfolio.

Of all the options (there are many) I favour these two: 

Gold coins -- preferably older gold sovereigns in premium grade. These can be obtained at a small premium over other physical bullion options due to their collector value. Collector value is an interesting side-kick to your investment which adds further downside protection.

Shares in gold companies -- preferably large companies with a lower risk profile. These can often outperform gold price as their profitability increases exponentially with increasing gold price. The sharp decline in gold price 2012-15 is actually to investors benefit now, since these companies were forced to reduce cost of production.

As with everything, nothing can be guaranteed, but by accepting and adjusting to trends, gold investors can improve their performance. Contact us with any questions in relation to this topics, we will be happy to assist in your investment aims.


 

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