As September begins, gold faces a familiar challenge – historically marked by price declines. Despite its strong performance this year, reaching an all-time high of US$2,531.70 per ounce, market participants are closely watching whether these gains will persist.
September Curse for Gold
According to Bloomberg, since 2017, gold has consistently suffered a “September curse,” with an average 3.2 percent decline during the period, the steepest drop of any month in the year. The month is also typically the worst for US stocks, but a strong month for the American dollar. This pattern has raised concerns among investors and analysts who are debating whether the factors bolstering gold in 2024 can counteract its seasonal weakness.
Additional Insights
One key driver behind gold’s surge has been geopolitical uncertainty, particularly Russia’s conflict with Ukraine and tensions in the Middle East, boosting demand for gold as a safe-haven asset. Furthermore, expectations of US Federal Reserve interest rate cuts have increased gold’s appeal by reducing the strength of the US dollar, traditionally inversely related to gold.
Gold Forecast
Gold is still seen as having significant value in long positions, with a bullish $2,700 forecast for 2025 by commodities strategist at Goldman Sachs, Lina Thomas. The Fed’s upcoming meeting in September will play a critical role in determining the future trajectory of gold.
Sell in May and Go Away Philosophy
The recent dips in gold prices during September may be attributed to the “sell in May and go away” philosophy, where traders buy gold as a hedge against volatility before vacation and sell upon their return to participate actively in the market. Despite this, historical data shows that over three decades, gold has risen in September, suggesting that other factors could sustain its high levels.
Central Bank Support
Central banks, notably China’s central bank, have been significant buyers of gold, providing strong support for the metal. While China’s buying spree has paused, potential resumption from China and other Asian nations could further bolster gold prices.
Looking Ahead
As September progresses, the question remains whether supportive factors such as central bank buying and geopolitical developments will be enough to offset the historical September price decline trend. The outcome of the Fed’s meeting later this month will be crucial in determining if gold can break the “September curse” this year.
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