first majestic silver

Remember, Remember, Gold In September

CEO & Chief Investment Officer @ U.S. Global Investors
September 5, 2014

In American poet W. S. Merwin’s poem “To the Light of September,” the speaker calls the ninth month “still summer,” yet with a “glint of bronze in the chill mornings.”

I agree—to an extent. Here in San Antonio, Texas, home of U.S. Global Investors, we’re most definitely still in the summer season. But in the investing world, when we talk about September, there’s a glint not of bronze but another precious metal: gold.

That’s because September is historically gold’s best-performing month of the year, returning 2.16 percent on average since 1969.

I invite you to compare the chart above, updated to reflect the most recent monthly returns, to the one published this time last year.

Drivers of Gold

There are several seasonal factors that explain why gold glitters a little more brightly in September. The most notable reason is what I call the Love Trade. In India, this month marks some of the most spirited gold-buying in anticipation of Diwali, which falls on October 23 this year. Following closely behind is the Indian wedding season, when gold is purchased for the bridal trousseau and as gifts in jewelry form. And September is normally when retailers restock their wares ahead of Christmas and after the Islamic month of Ramadan, at the end of which gold jewelry is commonly exchanged.

Another explanation might also be the inverse relationship between bullion and stocks, which only becomes more apparent in September. Earlier this week I discussed how September is historically the worst month of the year to trade stocks in. It’s very possible that many investors turn to gold in September, knowing that the month’s stock returns are typically poor.

The yellow metal had a tough 2013—its worst since 1981, in fact—and in September its price fell 5 percent, from $1,396 an ounce to $1,327. Although a movement such as this is generally normal for gold, a loss in the ninth month is somewhat rare. In the last 20 years, there have been only five Septembers in which gold prices ended lower than they started at: 1996, 2000, 2006, 2011 and 2013. That’s once every three and a half years on average.  

We’re only a few days into the month, and so far spot prices have dropped about 1.6 percent. But this is completely in line with gold’s normal behavior. As I pointed out in the second part of “Managing Expectations,” it has a daily standard deviation of ±1 percent.

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Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

Frank Holmes is the CEO and Chief Investment Officer of U.S. Global Investors. Mr. Holmes purchased a controlling interest in U.S. Global Investors in 1989 and became the firm’s chief investment officer in 1999. Under his guidance, the company’s funds have received numerous awards and honors including more than two dozen Lipper Fund Awards and certificates. In 2006, Mr. Holmes was selected mining fund manager of the year by the Mining Journal. He is also the co-author of “The Goldwatcher: Demystifying Gold Investing.” Mr. Holmes is engaged in a number of international philanthropies. He is a member of the President’s Circle and on the investment committee of the International Crisis Group, which works to resolve conflict around the world. He is also an advisor to the William J. Clinton Foundation on sustainable development in countries with resource-based economies. Mr. Holmes is a native of Toronto and is a graduate of the University of Western Ontario with a bachelor’s degree in economics. He is a former president and chairman of the Toronto Society of the Investment Dealers Association. Mr. Holmes is a much-sought-after keynote speaker at national and international investment conferences. He is also a regular commentator on the financial television networks CNBC, Bloomberg and Fox Business, and has been profiled by Fortune, Barron’s, The Financial Times and other publications.  Visit the U.S. Global Investors website at http://www.usfunds.com.  You can contact Frank at: [email protected].


78 percent of the yearly gold supply--is made into jewelry.
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