Alternative Investments

Is September a “Golden” Month for Gold?

September is here.

Kids are back in school… kind of.

And adults are back from summer vacation, fighting traffic to get into the office… kind of.

The ongoing battle against COVID-19 and its delta variant continues to throw hazards in the path of our way back to normal.

Regardless, summer fun is done – or, at the very least, coming to an end. Starbucks (Nasdaq: SBUX) is stocking up on all the necessary ingredients for all things pumpkin spice. And the days are starting to get noticeably shorter as the temperature lowers.

We’ve talked over the years about the broader markets penchant for swooning during September.

Well, at the moment, there’s another trend being touted across social media and financial news networks: September is a “golden” month for gold.

But is it?

A Golden Goose Egg?

Type “September is the best month for gold” into your favorite search engine and you’ll get a litany of results.

All of them explain why September is historically a bullish month for bullion.

Now, not to get nitpicky… but if you go all the way back to 1973 – when gold began trading freely – it appears September has barely surpassed January as the best month for the precious metal.

But I always argue it’s imperative to recognize that markets change when looking at seasonal or trend trading strategies. The mechanisms underpinning trades – like desktop trading, mobile trading and algorithms – become faster and more complex.

At the same time, investors recognize trends and try to get ahead of them to exploit them. In turn, this changes these trends.

Over the years, I’ve routinely updated my seasonal and trend trading strategies to respond to the changing environment.

And the idea that September is the best month for gold is a perfect example of why I do this.

September’s Outdated Promise

Since 1973, the average gain of gold in the month of September has been 1.8%.

But let me show you something…

Gold’s average gain in September over the past 30 years has been 0.97%. That makes it the third-best month for gold, behind January and February.

Now, over the past 20 years, bullion’s average gain in September has been 1.54%. Again, this makes it the third-best month for gold behind January and February.

And over the past 10 years, gold has averaged a 0.31% gain in the month of September. That makes it the fourth-best month for gold, with August moving into third place.

In fact, gold gained more than 6% in August 2019 and August 2020.

So here are the real takeaways – with historical proof – that are rarely discussed…

The Real Golden Lessons

First, January and February are two of the best months for gold. Hands down.

That’s been true since 1973. And it’s been true over the past 10, 20 and 30 years.

Second, without a doubt, March is the worst month for gold. In every scenario, March averaged a negative return.

Of course, over the past decade, the average negative returns in October, November and December were much larger than they were in March.

In the past, the tradition of buying gold jewelry in India during this time – for weddings and festivals – helped to prop up gold during these months. But the reaction in gold prices to this buying has become much more compressed to January and February.

So September isn’t really the golden month for gold as so many claim it to be.

It is traditionally one of the best months for the precious metal. But if you’re looking for the most bang for your buck, the new year is what really propels prices higher… albeit briefly.

This example illustrates why we as investors have to recognize how trends change and evolve over time. Otherwise, we’ll be stuck in the past while the markets plow forward.

Here’s to high returns,

Matthew

P.S. If you’re interested in gold and other alternative investments, check out my latest articles on those subjects here.

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