Gold investors hurting from prices within 1 percent of a two-month low can find solace from history showing the metal tends to perform best in September.
The CHART OF THE DAY shows bullion averaged gains of 3 percent each September over the past 20 years, beating next-best month November, when prices rose an average 1.8 percent. Gold reached $1,273.14 an ounce on Aug. 21, the lowest since June 18.
Buying typically increases with India’s festival period, which runs from late August to October and is followed by the wedding season, times when bullion is bought for part of the bridal trousseau or in jewelry form as gifts from relatives. Chinese purchases may also increase toward year-end, before the country’s Lunar New Year celebration in February. The nation replaced India as the largest user in 2013.
“Indian jewelers and dealers will be stocking up in the coming weeks, so it should affect prices,” said Mark O’Byrne, a director at brokerage GoldCore Ltd. in Dublin. “A lot of traders are aware of this trend towards seasonal strength, so that may contribute to higher prices. They tend to buy and that creates momentum.”
The metal traded at $1,283.68 in London yesterday for a 6.8 percent gain this year, rebounding from a 28 percent drop in 2013, according to Bloomberg generic pricing. That decline, the most in more than three decades, spurred more jewelry to coin purchases in Asia, even as India’s government choked off imports to curb a current-account deficit. Still, prices slipped 4.7 percent last September, bucking the long-term trend.
Gold’s performance next month will probably lag behind the historical average because demand from China is expected to be subdued until prices drop toward $1,200, UBS AG wrote in an Aug. 20 report.