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September – the Best Month for Gold (and Worst for Stocks)

By Louis G. Navellier September 10, 2016


It’s that time of year again.  Summer is winding down.  The kids are going back to school. Football is returning and the baseball pennant race is heating up.  In many northern states, a bracing cool breeze is breaking the back of the summer heat wave.  Leaves will be falling soon. As the old (1938) song says:

It’s a long, long while
From May to December
But the days grow short
When you reach September.

When the autumn weather
Turns leaves to flame
One hasn’t got time
For the waiting game

–“The September Song” by Maxwell Anderson

Historically, September is gold’s best month (by far) and the stock market’s worst month (by a long shot).

This September started out just fine for gold, with a strong surge after a mediocre monthly jobs report was released early last Friday morning, September 2.  Gold touched a summer low of $1,301.75 on Thursday, September 1 but it surpassed $1,350 on September 6, after the long Labor Day weekend.  Ever since June 24, the day after the surprise “Brexit” vote, gold has stayed over $1,300 per ounce, but it came close to breaking that support level on September 1 before the jobs report resurrected a rather drowsy gold market.

The reasoning behind gold’s latest rise is that the employment situation is the most important barometer for Janet Yellen’s Federal Reserve, since she is a labor market specialist who wants to see some healthy wage price gains and a vibrant job market before raising interest rates again.  With another meeting of the Federal Open Market Committee coming in mid-September, the latest jobs report indicates that the Fed will likely delay a rate increase once again in that meeting.  After that, the next FOMC meeting is set for November 2, right before the election, so they won’ likely act then, either. That leaves mid-December as the only likely time the Fed could get away with a small (0.25%) rate increase in 2016. With interest rates low in the U.S., and negative in Japan and most of Europe, gold has a clear advantage over cash deposits.

Golds Best Month EverIn the 43 years since 1973, when the gold price was allowed to “float” in the world’s markets, the price of gold has risen an average of 2.2% each September, far above the performance of any other month. The average return for the 11 other months is just 0.6%, represented by the flat red line in the chart, above.

This chart also shows that gold’s best six months are September through February, vs. the six relatively flat months of March through August.  That’s because the gold-giving holiday seasons in the major gold-buying nations tend to fall in the fall and winter months. Gold is a meaningful investment in modern times, but it is also a “gift of love” dating from ancient times.  As more Asians and other developing nations enter the middle class, more young men will be able to afford a golden gift for their wife or sweetheart.  In that part of the world where women wear their wealth as a status symbol, these holiday patterns represent a time for extra adornment, pushing up the price of gold in various holiday seasons.

Specifically, jewelry fabricators must order their raw gold in September in order to create the needed end products for holiday celebrations coming up in several major cultures, led by Diwali and wedding season in India, Christmas in the West and then the Chinese New Year and Valentine’s Day.  This fall’s holiday season kicked off last week with India’s Ganesh Chaturthi festival, which fell on September 5 this year.

In the last two years, gold demand has been sub-par in India due to low rainfall during monsoon season.  About one-third of Indian gold demand is tied to the agricultural profits from small farms in India.  With near-drought conditions there in 2014 and 2015, gold demand was significantly lower in India.  On top of that, there was a jewelers’ strike during most of March and April this year. But with the coming of strong monsoon rains this summer, the outlook for gold demand in India this fall is rising sharply. Because of strong monsoon rains, the gold analysts at Thomson Reuters GFMS have predicted an increase of 11% in gold demand for India this growing season vs. the previous (September 2015 through mid-2016) season.

Another positive indicator gold for this September is flagging investor sentiment.  At the end of August, Mark Hulbert reported that “for the first time in six months” gold traders “are net short the gold market, meaning they are betting on a decline. According to the contrary logic of contrarian analysis, their bearishness is a positive development.”  His Hulbert Gold Newsletter Sentiment Index (HGNSI) stood at minus 2.2%.  This compares with a lofty reed of nearly +60% last May, when gold traded under $1,300.

Gold Market Exposure Level

September is Also the Stock Market’s Worst Month

In the 120 years since the Dow Jones Industrial Average was created in 1896, September has delivered an average decline of 1.1% vs. an average gain of 0.8% in the 11 other months.  October is famous for its exceptional crashes in years like 1929, 1987 or 2008, but September is noted for its consistently bad performance.  In most of the 12 decades of the Dow’s existence, September was in 11th or 12th place among the 12 monthly rankings, according to Hulbert.  By comparison, October has been strong lately:

Average Monthly Change For the DJIA

Source: Bespoke Investment Group


In the Dow’s 120-year history, its average annual gain is about 7%, but September has been the only consistently negative month.   We advocate both stocks and gold, but if you had to choose an entry point, it could be best to buy gold in early September and buy stocks in late October.  Stocks may (or may not) fall again this September, but history also shows that stocks tend to recover rapidly.  For instance, in this time of honoring the victims and heroes of September 11, 2001, it’s therapeutic to see that stocks recovered to their pre-crisis (September 10) levels within two months, despite the initial mass sell-off.

DJIA During 9.11.01

Source: Wikipedia

Gold began its longest, strongest bull market after the tragedy of 9/11.  Now that 15 years have elapsed since that tragic day, it is instructive to see why gold and stocks both belong in a balanced portfolio.

Bullion Prices 2001 to 2016

Gold has basically risen four times faster than stocks since 9-11, but stocks still deserve the most prominent role in most portfolios.  Despite the dollar’s recent strength (since 2014), the U.S. Dollar Index (DXY) is down sharply since 2001, when it peaked at 120.  It’s current value us 95, down about 20% in the last 15 years.  A weak dollar is generally positive for gold and other commodities.  That is why the current gold bull market is so impressive: Gold is rising in 2016 despite a recently-strong U.S. dollar.

Unlike many gold marketers, we do not denigrate the primary role of stocks in a balanced portfolio, even in the historically dangerous months of September and October.  We advocate gold ownership as a rational portfolio allocation alternative to cash or some low-yielding bonds.  Even though stocks tend to fall in the fall, long-term investors should not sell stocks based on historical storm warnings tied to the calendar, but September is the best time to take a position in the gold market.

As “The September Song” reminds us….
One hasn’t got time
For the waiting game