The Not So Golden Month

“Autumn carries more gold in its pocket than all the other seasons.”

– Jim Bishop

One of the best-performing assets so far in 2024 has been the yellow metal – or gold – up about 22% year-to-date as of this writing. In The Golden Age (posted in April), we highlight the remarkably strong performance of gold at that time, not only in U.S. dollar terms but against other major currencies as well. Since that post, gold has continued its ascent, rising an additional 7% and pushing to all-time highs above $2,500 per ounce. However, gold investors might want to exhibit some caution as September tends to be a tough month for the precious metal.

This week’s chart highlights the monthly seasonality of gold price returns over the last decade. On average, September has seen a 2.9% decline, with negative returns in nine out of the last 10 years. No other month comes close to this consistency or magnitude of monthly losses.

Several factors might contribute to this seasonal pattern. First, central bank demand, which has been a dominant force in gold in recent years, might be subject to changes in purchase patterns in the month, as most institutions have a fiscal year that ends in September and might adjust holdings during the month. Second, over the last 10 years, September has been the strongest month for the dollar, rising on average over 1%, which has negative implications for the price of gold, which is measured in dollars. Third, seasonal demand from India and China often ebbs in September before rising into year-end with holidays and festivals leading to increased demand for gold.

In Seasonal Instability, we note that equities tend to underperform in September while stock volatility rises. Interestingly Bitcoin, often referred to as “digital gold,” underperforms in September as well, averaging a decline of 5.9% over the past 10 years.

Although September can be a challenging month for gold, the positive medium-term drivers remain intact – ongoing geopolitical and U.S. election volatility, and concerns over the unsustainable fiscal trajectory in the U.S. In addition, the dollar has been on its back foot, with the U.S. Dollar Index down 5.4% from its 12-month high as of Sept. 5.