Gold: Do We Sell In May and Go Away?

Written by Goldfinger

Gold has taken quite a beating lately.  I thought it might be of value to take a look at some historical trends of gold.  There is an old saying regarding gold:  “Sell in May and go away”.  In the past, one could sell in May and wait until the end of summer to buy back when gold would take off again.

The complementary adage is that gold shines between September and May.  However, being invested in gold in March and Octobers has not been beneficial historically. 

Source-US Global Research

But as they say, all good things must end.  The historical trend train has left the track. Suddenly in September 2011, something changed in the historical trend cycle for gold. September, normally the best month for gold, was a very bad month last year as you can see from the chart below.

September, November, December, and January are usually the best months for the yellow metal.  September, November and December didn’t fare well.  February didn’t look much better and March is looking true to form-being one of only 2 months with a negative history.  These months, except for March, are prime season for gold.  Have the trends in gold’s fortunes changed?  This GLD-Spider Gold Trust ETF chart, below, is starting to look like October 2008.

I have not liked the way gold is acting.  I mentioned in a previous blog, a couple of weeks ago, Market Instincts: When To Bail, that I am in total cash.  Since I cashed out, gold has fallen more than $100.

I don’t think gold’s run is over, but I do think it is taking a breather.  It just might be that for gold it is May in March this year.  And maybe the historical end of summer rally will happen at the beginning of summer in 2012.

Stay Tuned.