Each year, like clockwork, investors predict the price of gold will rise with a seasonal increase in demand created by a string of gift-giving festivals including Diwali, Thanksgiving and Christmas.
But the influence on gold's price is drastically exaggerated, according to a report released by Capital Economics on Tuesday.
"You get a lot of talk without looking at the data," said Ross Strachan, a Capital Economics London-based commodities economist who worked on the report. "The price goes up and (investors) start instantly looking for reasons for that."
The belief is held worldwide and increases as a country's gift-giving season approaches, Mr. Strachan said. In India, for example, wedding season and Diwali make investors hyper aware of the interest in the metal.
If annual patterns were a driving factor, investors could profit at the expense of others by simply following the calendar, the report said, adding more people would position themselves if that were true. The market's increased liquidity created by the participation of financial institutions means extra demand is smoothed, the report said.
There's some truth to the cyclical nature of the metal's appeal. Generally, gold prices are relatively weak in the summer. The biggest slump comes in June before prices firm up for the rest of the year, the report said. However, Mr. Strachan argues the calendar effect is small compared to other influences.
"It's important to look at what the most important factors are driving the gold price over the next 12 to 18 months and not to get too caught up in these relatively small fluctuations in price due to seasonal factors," he said.
Inflation, health of the global economy and risks of sovereign debt will have a much greater influence on the price of gold over the next six months, he said. Capital Economics is forecasting gold will be $1,650 (U.S.) per ounce by the end of this year and $2,000 in 2012.
Mr. Strachan said economic uncertainty creates upward pressure on gold's price. "Gold is seen as the classic safe haven from the threats of the world," he said, adding that last week many Greek investors were buying gold bars and coins to diversify.
Charles Oliver, gold and precious metals fund manager at Sprott Asset Management, pointed to other seasonal factors, like summer vacations, which also slow the market.
"There are micro seasonal factors and I will acknowledge my belief that that happens to a degree," he said. "It's not a cookie-cutter model that you can just say buy now and sell the next day. It's better to look at the long-term trends."
Mr. Oliver said he's expecting gold to reach $2,000 in the next year, which will continue to be driven by the debasement of currencies.
"It's not really the price of gold that's going up, it's the value of the yard stick that we use to measure it, that's going down. In this case, it's the U.S. dollar," he said.
Regardless of the time of year, Mr. Oliver said he recommends investing in gold.
"I believe it's going a lot higher," he said. "So, I continue to think investment in gold, or hard assets that keep their value against inflation, should be a part of everybody's portfolio."