Frank Holmes Says "Buy Gold"

Gold is sitting tight at $1,212 this morning. It popped up from $1,200 yesterday the moment that first-time jobless claims numbers came out…and hot money fled for safety.

So what’s the outlook from here?

“If history is any guide,” says US Global Investors chief and Vancouver favorite Frank Holmes, “gold is about to get even more attractive because we are heading into the fall and winter gift giving season.” The Muslim holy month of Ramadan is just around the corner… followed by India’s Diwali festival, Christmas in Europe and the Americas and then Chinese New Year.

“Looking at more than four decades of seasonality, September has been the best month of the year for gold. In a typical year, the September price rises 2.5% above the August price.”

Monthly Gold Returns

“And to make the case even more compelling,” Frank adds, “the gold price has risen in 17 of the 21 Septembers since 1989, by far the best success ratio of any month of the year.”

July is usually a sleepy month for gold…but not for US Gold Eagles this year. Buying in May heated up to levels unseen in over a decade, and then cooled off in June. July turned out to be the second-best month this year.

US Monthly Gold Eagle Sales

Speculation continues to abound about whether the Mint will issue collector-grade uncirculated and proof Eagles this year – which it did not in 2009. The Mint says it’s “continuing to work with current and potential blank suppliers to increase the supply of silver and gold blanks in amounts that may make it possible” to do so. Stay tuned.

So what about gold stocks? “September is historically an even better month for gold stocks,” says Frank Holmes, “as measured by the NYSE Arca Gold Miners Index. The strong correlation between the gold price and gold-mining stocks explains much of the average September jump for gold stocks, which have historically offered leverage to the gold price.

“This leverage is shown on the chart of how bullion and the miners have fared in late-summer and fall rallies during the gold bull market that began in 2001. These uptrends have generally occurred between mid-July and early October, though in 2004, it extended into late November.

Late Summer Gold Rallies

“The gold price has climbed an average of 12.4% during the 2001-09 seasonal rallies even as the price steadily moved into four digits. As good as that result was, the impact on gold stocks was even stronger – their annual jump averaged more than 26%.”

Dave Gonigam
for The Daily Reckoning