When is the best time to buy gold and silver? When the prices are pulling back. What do most people do when buying gold and silver? They buy when the prices are taking off. It is this mentality that I wish to "re-frame" in this article. The time to buy gold and silver is when the price is falling, contrary to buying the stock of a company where the price is falling. Why? Because you will see the multitude of reasons the price of gold and silver will be much higher in the future, whereas with a company whose price is falling, it takes a return to profitability to get its stock price moving higher. The whole world is chasing gold and silver as their currencies implode. Summer Doldrums in Action? The summer pattern of lower prices for gold and silver may have finally started, as the dollar was up about 1% on word that Bernanke is playing down any potential QE3. Bernanke is good at talking the talk, but in the end he always resorts to the only thing he knows in stopping deflation, and that is more QE. So expect more QE in the future. Seasonality is an important part of trading silver and gold. Historically, prices have risen during the last three months of the year and into the first five months of the following year, while the summer months have seen silver prices decline. Whether it is people doing other things, like taking vacations, investment demand decreases during the summer months. Knowing this, a trader can be a little biased in trading the direction. The following chart shows the 40-year and 15-year seasonal pattern, followed by a chart of the 2000-09 pattern showing the summer historic summer doldrums for silver. This is a pattern that has been consistent and one a trader can profit from utilizing. As the economy deteriorates, however, this pattern could become less reliable, as silver garners more strength the full year rather than taking the summer off. The same would be true for gold. The Mentality of the Average Investor Before being able to critique anyone, one must have had experience observing what people know about investments. I have spent approximately 25 years listening to what people know about investing. The truth is, not much. Our education system is set up as such where most younger people don't learn much about investing. The same goes with college-age students. As we progress to adulthood, we end up relying on a financial advisor, banker or insurance agent for advice on where to invest one's money. They always try and tell you to put your money in stocks, bonds or possibly some in REITs or international funds. All in all, there isn't much in one's portfolio that counteracts the fall of the U.S. dollar. Most of these advisors don't sell physical gold or silver. They were never taught anything about them in their tests or from their peers except that they are a "risky" asset that sits at the top of the investment pyramid (commodities). But over the last 10 years, gold and silver have moved up in price every single year, and your advisor hasn't put you in them. What else besides Treasury Inflation Protected Securities (TIPS) counteract the U.S. dollar risk for U.S. stocks, U.S. corporate bonds, U.S. government bonds, U.S. CD's and U.S. Treasuries? While TIPS have some hedge against a falling dollar, they will lag any forthcoming inflation, and their returns are already skewed by a government that doesn't like to pay out Social Security increases to seniors as they have reconfigured what they think constitutes inflation over the years. Gold and silver do two things for one's portfolio. They act as insurance against the credit contraction that is occurring as a "safe haven" against potential bank defaults and protect one's portfolio from future Quantitative Easing by the Fed.

Source