Gold: Sell Now, Buy Later

Posted by Bull Bear Trader | 4/10/2008 03:51:00 PM | , , , , , , , , | 0 comments »

Analysts at RBC Capital Markets are suggesting that investors should take profits in gold as the traditional summer slowdown approaches - with the slowdown this year coming in concert with the potential for the Fed to quit lowering rates, thereby easing inflationary pressures. RBC then suggests buying back gold (hopefully at lower levels) in July, waiting for the rebound in gold prices that should occur in September or October.

The RBC analysts uses some data to support his/her case. Apparently the one year average return for gold equities following the beginning of an interest rate cut cycle is 17%. The current cycle began over 6 months ago, with gold and gold equities returning over 20%. The average cycle last about 8 months. Once the rate cuts begin to take effect (usually delayed 6 months), gold will generally under-perform the broader market.

Certainly worth considering, and interesting, but more research is probably in order. Keep in mind as well that gold plays often end in tears, as reversals are at times steep, swift, and unexpected.

RBC Recommended Tickers: KGC, HMY, JAG, and WGW
Other Gold Tickers: GLD, GG, NEM, ABX, AEM, KGC