first majestic silver

Strong US Dollar Weakens Gold Prices This September

CEO & Chief Investment Officer @ U.S. Global Investors
September 10, 2014

Last week I wrote about the historic correlation between the month of September and the strength of gold. Now it appears that this September might be shaping up as one not to remember but forget.

Based on data reaching back to 1969, gold rises 2.1 percent on average in September. Ten days into this year’s month, however, the precious metal has lost 2.6 percent, slipping from $1,288 to $1,254.

As I pointed out last week, a dip such as this might be common in other months, but it’s somewhat rare in September. 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. Although we remain optimistic, 2014 might see another such down September.

So What Gives?

September is statistically both the best month for gold and worst month for stocks. Though there isn’t an absolute certainty that each September will be as equally kind to gold, decades’ worth of data support this inverse relationship. Investors, aware of the probability, typically move some of their stock positions into gold.

But another inverse relationship exists that also influences gold’s performance: the relative strength of the U.S. dollar. When the dollar does well, many investors choose greenbacks rather than yellow metal as a reliable safe haven from volatility.

This month, the inversion has only intensified as the U.S.’s ISM Manufacturing Index for August rose to a three-year high of 59.0, strengthening the dollar. While a jump in the ISM index is a welcome event, commodities such as gold tend to take it on the chin.

Another factor weighing on the metal is the weakening euro, which statistically has the opposite effect. When the euro is down, so too is gold because dollar-denominated gold becomes more expensive for Europeans and other non-Americans. Recently the eurozone’s currency hit 14-month lows against the dollar.

Again, even though this particular September has thus far fallen below expectations, we remain bullish on gold in our Gold and Precious Metals Fund (USERX) and World Precious Minerals Fund (UNWPX). As I’ve frequently written about, the Love Trade is a reliable occurrence around this time of year that helps bolster the metal’s performance.

And as always, we at U.S. Global Investors recommend a 10 percent weighting in gold: 5 percent in bullion, the other 5 percent in gold stocks, then rebalance every year.

******** 

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.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

Gold, precious metals, and precious minerals funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The prices of gold, precious metals, and precious minerals are subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5% to 10% of your portfolio in these sectors.

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].


According to the Talmud you should keep one-third of your assets each in land, business interests, and gold.
Top 5 Best Gold IRA Companies

Gold Eagle twitter                Like Gold Eagle on Facebook