September is becoming a good month for GC00 gold,
This is because there is an additional factor in favor of bullion in September: seasonality. Since 1973, when gold began to trade freely, September has been the best month of the year for yellow metal.
The following graph shows the data. The September average return on gold was 1.8%, more than double the 0.8% average for the whole month.
Of course, there is no guarantee that gold will win in September. Due to the significant variability in monthly results, the historical gold pattern with a better-than-average yield in September is statistically significant at the 93% confidence level, according to my calculations.
While avoiding the 95% level that statisticians often use, it may be high enough to justify including it in the range of factors to consider in a gold trading strategy over the next month.
Many of these other factors are also bullish, including:
The recent rise in US inflation may be more than temporary. Not everyone believes that there is higher inflation to keep us going, but those who do find a lot of evidence to back up their argument. Bond guru Jeffrey Gundlach, founder and president of Los Angeles-based DoubleLine Capital, said last week that the odds now favor average inflation above 5% all year long. He especially noted the impact of the imminent lifting of the moratorium on evictions. This could cause landlords to increase rents aggressively, which in turn would lead to an even higher rise in the CPI.
Federal Reserve Chairman Jerome Powell noted an obscure note at last week’s Jackson Hole symposium. While he noted his willingness to start slowing the Fed’s aggressive pace of buying government bonds as early as the end of this year, he also made it clear that he was also willing to keep interest rates low. until next year or so.
Despite these bullish factors, equilibrium gold market timers remain low, if not directly bearish. This is a good sign, according to contrary analyzes, because the chances of gold meeting would be greatly reduced if there were too much bullish among the gold timers. Definitely not right now. According to the latest reading from the Hulbert Gold Newsletter Sentiment Index, gold timers recommend on average that their clients devote only 3.3% of their gold trading portfolios to long-term stocks.
Why does gold tend to rise in September?
You should not bet on a statistical pattern unless there is a plausible justification for why it should exist. I made this argument in a column last week when I pointed out the lack of this justification in the case of the below-average U.S. stock market’s historical performance during September.
But there may be a justification in the case of gold. Several, in fact. Dirk Baur, a professor of finance at the University of Western Australia School of Business, has argued that the strength of gold in the fall may be caused by one or more of the following:
“Investor demand coverage in anticipation of the” Halloween “effect on the stock market”
“The demand for gold jewelry of the wedding season in India”
“Negative investor sentiment due to shorter light time.”
To be sure, more research is needed here. While each of these three factors has been shown to be significant in itself, a cause-and-effect relationship with gold has not been shown. Still, don’t be surprised if the gold will perform well over the next month.
Mark Hulbert regularly contributes to MarketWatch. His Hulbert Ratings keeps track of investment bulletins that pay a fixed fee to be audited. You can contact him at [email protected]
Month: Why you should think twice before betting that stocks will have a tough September
Also read: Since 1997, the S&P 500 has not had such a strong concentration to this day. What’s going on?