By Frank Holmes, CEO and Chief Investment Officer, U.S. Global Investors.
Global economic conditions are now favorable for gold as a safe-haven investment. The U.S., Western Europe and Japan are close to buckling under the weight of their sovereign debt loads, government budget deficits remain large and persistent and, as a result, faith in major paper currencies is low.
On top of this, China – the world’s No. 1 gold producer and No. 2 gold consumer – is encouraging gold investing by its rapidly growing middle class, and will likely have to increase imports to meet this new demand.
If history is any guide, gold is about to get even more attractive because we are heading into the fall and winter gift-giving season. This is the time of year that gold jewelers typically do their biggest business. The kickoff is the Muslim holy month of Ramadan, which starts next week and ends with generous gift-giving in early September.
After Ramadan comes India’s post-monsoon wedding season, and in November there’s Diwali, one of India’s most important festivals. During the fall, jewelry makers in the U.S. and Europe stock up in advance of the Christmas shopping season. And in China, there are two big gold opportunities: the week-long National Day celebration starting October 1, and the Chinese New Year in early 2011.
Looking at more than four decades of seasonality, September has been the best month of the year for gold and gold stocks.
