Over the past seven years, gold hasn’t averaged negative returns of more than 1% in any month.
Except for September.
The curse of the ninth month has been well documented and researched. Precious metals aren’t the only asset class with such month-dependant performance trends. Equities markets have historically also performed horribly in September. Since 1945, the S&P 500 has returned -0.6% on average in September.
A tale as old as time
A recent Bloomberg report suggests that the September “curse” has confused many economists who feel markets behave efficiently.
Unlike the S&P 500, however, gold’s struggles in September have only been trending for about the past eight years. Over 30 years, gold has brought returns in September — but recent market volatility in the summer months could give insight into why the metal drops as autumn begins.
“Traders are buying bullion to take a defensive position over the increasingly turbulent summer months, before selling on their return to the office in September,” the Bloomberg report states.
However, that begs the question: Where is that money flowing back to, considering equities markets have typically also dropped during the same month?
Repositioning to what
The answer is the dollar — and bonds — at least in recent history.
Treasury note futures have averaged a 6.93% gain over the past 10 years. The dollar has risen every September since 2017, sporting an average gain of 1.2% in the month.
In September 2022, the dollar index ($DXY) reached a recent all-time high of 113.26, though it has precipitously fallen to a current level of 101.13.
It’s no surprise that gold has dropped during a month when the inversely correlated dollar has performed strongly.
The big question this year
Plenty of signs suggest a continued drop in the dollar and a continued upswing with gold as the Federal Reserve prepares to cut interest rates at this month’s FOMC meeting likely. However, given the typical performance of the precious metal in September, and the fact gold is trading near all-time highs, it’s also possible the trend of the curse continues.