The Logic of selling Gold in May and ‘going away.’

Commodities / Gold and Silver 2010 May 20, 2010 - 01:45 PM GMT

Best Financial Markets Analysis Article Should you invest – or should you trade?

Featured is the gold price in 2001. Selling in May and buying back right after Labor Day would have yielded a small profit, provided that the sale was made right at the top in May (not easy).

Charts courtesy Stockcharts.com

Featured is the gold price in 2002. Selling gold at the top of trading during May and buying back after Labor Day would have produced a small profit, assuming you were smart enough to wait until the last day of May to sell your gold.

Featured is the gold price in 2003. Selling in May and buying back in September would have caused a loss that year.

Featured is the gold price in 2004. Selling in May and buying back in September would have produced a loss even if you were smart enough to wait till the last day in May to sell.

Featured is the gold price during 2005. Selling in May and going away would have cost money that year.

Featured is the gold price chart from 2006. Selling at the top in May and buying back after Labor Day would have paid off, even if you missed the exact top.

Featured is the gold price chart from 2007. Selling in May and going away would have cost money in that year.

Featured is the gold price chart for 2008. Finally we have an example where selling at anytime in May and buying back the first week of September would have produced an obvious profit. However it was only because of the credit crunch that this was so. Would you have bought gold then? DID you buy gold then?

Featured is the gold price chart for 2009. Selling in May and buying back in September would have cost money even if you were able to catch the exact peak in May.

This is the gold price at the present time. Should you sell in May? Was 1250 the top for May, or will price rise to a higher level before June 1st?

How about the investor who purchased gold at $260 (the first price visible in this essay) and held on for ten years to the current $1180! His or her profit is 353%. On an annual basis that works out to 35% per year! From this essay we draw the conclusion that investors make far more money (with very few exceptions) than do traders.

Misinterpretation of current trends by some analysts notwithstanding, the massive amounts of money creation on a worldwide basis guarantees that this rising trend will continue!

Happy trading!

By Peter Degraaf

Peter Degraaf is an on-line stock trader with over 50 years of investing experience. He issues a weekend report on the markets for his many subscribers. For a sample issue send him an E-mail at itiswell@cogeco.net , or visit his website at www.pdegraaf.com where you will find many long-term charts, as well as an interesting collection of Worthwhile Quotes that make for fascinating reading.

DISCLAIMER: Please do your own due diligence. I am NOT responsible for your trading decisions.

Peter Degraaf Archive

Comments

Jay Walker
21 May 10, 15:25

Selling gold in May

Sir,

The comment of selling gold in May and "going away" may work well from a technical standpoint. However, hindsight has been and always will be 20/20.

Certainly, one with the ability to call tops and bottom at the perfect moment can make a mint selling in May and buying back at Labor Day. But in reality, few, if any, have such talent.

One can save on brokerage fees (if buying ETF's) or markup (if buying physical bullion) by simply buying on the dips and holding on to assets.

Regards,

Jay Walker

Nadeem_Walayat
21 May 10, 18:32

Seasonals timing

Seasonal timings can be good for two reasons

1. Distributing out of positions, you may want the money for something else

2. Accmulating into positions, you to add / buy into a gold position.

I.e. if you want to distribute - exit your gold position then there is a higher probability of getting a good price in early May, whereas if you want to accumulate then there is a higher probability of getting a good price by waiting until mid to late august.

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