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Gold Stocks: History Says they Are Going Higher
Gold cannot always go up. When it inevitably comes down or consolidates, many investors lose hope and sell out. These same investors will be back buying gold after the Fed or ECB or the next trigger point for gold arrives.
Holmes reminds investors that short-term setbacks for gold are normal throughout the year. The yellow metal has historically declined in value in March and June; whereas gold stocks always endure greater volatility month-to-month.
So while gold has its monthly ups and downs, on a historical basis, now is the time when gold enjoys its peak performance period of the year. Based on 10 years of data, gold bullion has historically increased 2 percent in August and 4 percent in September.
What is most interesting to us and Pinnacle Members, is that in respect to the HUI Index, over the past 10 years, gold companies have climbed 8 percent and almost 3 percent in August and September, respectively. This has been happenning already as many gold stocks are beginning to inch higher in anticipation of the fall and further stimulus.
Spot gold has only climbed 0.4 percent, compared to the HUI, which has increased about 5 percent since August 1.
Another thing to consider is that election years, for whatever reason, have recently had a negative impact on the price of gold. From 1984 through 2008, the performance of the Philadelphia Stock Exchange Gold and Silver Index (XAU) has historically been weak during the year of a presidential election. The silver lining is that the year following the election, the XAU has historically bounced back. Gold has followed through thus far in 2012, but should be finishing up 2012 significantly higher the $1600 range.
In respect to giving gold that extra boost, Credit Suisse believes that if the Fed or the ECB take these expected actions it would have the “potential to be powerfully bullish for equities” and might “drive renewed investor enthusiasm for gold that could see the metal trade up to and beyond the $1,700 mark.”
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