January is the Best Month to Replace Equities with Silver
- Silver and Gold outperform stocks more than 70% of the time in January
- A Seasonality analysis reveals that Silver outperforms the S&P 500 index by more than 7% in January
- Replacing your equities for silver or gold would have served you well over the past 20-years
Precious metals prices such as gold coins and silver bars are rising and there is no better time than the present to replace your equities with precious metals. Historically gold bars and silver coins have outperformed the S&P 500 based on a historical seasonality study. A strong macro backdrop favors purchasing silver over gold, but both precious metals should experience outperformance relative to the large cap equity index during the month of January. So, if you had replaced your equity shares with silver in the beginning of January, a seasonality study shows that you would earn 7.4% on average, during the past 10-years.
Seasonality Study
One of the best ways to determine if there is a relative value proposition is to use seasonality statistical study to determine if there is merit to an assumption. A seasonality study evaluates the performance based on a specific time frame, such as a month of the year, or even a season such as winter or summer. A monthly seasonality study can show you the performance of a specific asset, or even the relative performance of one asset compared to another. A seasonality study of silver or gold prices relative to the S&P 500 index shows you how well precious metals perform relative to a large cap equity index that is broad based.
One reason silver bullion or gold bars would outperform stocks in January is that many investors put off realizing their stock gains or losses until January to extend their tax liability into a future year. For example, if you have a short-term gain, in December, you will need to pay this liability in the approaching April. If you instead differ this gain until January, your liability would be differed into the following April approximately 15.5 months from the transaction date.
Seasonality Studies
The chart above is a performance chart that shows the relative performance of silver versus the S&P 500 index over the past 20-years. This incorporates a stock boom in the late 90’s, and the financial crisis that accelerated toward the end of 2008. During the past 20-years Silver prices have outperformed the S&P 500 index 75% of the time, with an average outperformance of 4.4%. February has also been a strong month for silver relative to the S&P 500 climbing 65% of the time with an average outperformance of 4.1%.
The performance during the past 10-years (which includes the financial crisis), is similar as silver prices have outperformed the S&P 500, 70% of the time, but the average outperformance in January is a more impressive 7.4%.
Gold also outperforms the S&P 500 index during the month of January if you perform a seasonality analysis that evaluates the past 20-years. During this period gold prices outperformed the S&P 500 index 70% of the time with an average outperformance of 3.6%. Historically months where stock prices experience volatility, such as August and September, are also periods when gold outperforms the large cap index.
During the last 10-years, the outperformance has been even stronger. For all the January periods between 2008 and 2017, gold prices have outperformed the S&P 500 index 8 out of 10 times, with an average outperformance of 5.8%.
With gold and silver prices beginning to accelerate higher, during a month that has historically been favorable toward precious metals investing, early January is the time to purchase gold coins or silver bars, replacing your stock holdings with precious metal. If you're interested learning how to add precious metals to your portfolio, call Treasure Coast Bullion.
Good Investing,
Treasure Coast Bullion Group
Read more by Treasure Coast Bullion Group, Inc - Staff Writer
