Even though gold $Gold - main 2412(GCmain)$ prices are still trading high, their upward momentum seems to wane with the arrival of September, a trend sometimes referred to as the “September Curse” in the gold market.
Nicky Shiels, the Head of Metals Strategy at MKS PAMP, recently highlighted that since 2009, gold prices have averaged a 2.4% drop in September. Analysts also note that since 2017, gold has averaged a 3.2% decline during this month.
It’s not just gold, silver also suffers in September. Over the past 15 years, silver prices have dropped an average of 3.7% in the last month of Q3.
Why does gold tend to fall in September?
Several factors might be at play. Analysts suggest that traders might adjust their asset allocation strategies during vacation periods, putting pressure on gold positions. Additionally, September often sees Federal Reserve meetings, which can strengthen the dollar and impact gold prices.
For this year, gold prices have risen over 20%, and with the U.S. stock market facing high valuations after a strong rally, it’s not surprising that investors are cautious as summer ends.
The recent weak gold price is also tied to the dollar, which has shown mild strength after falling to a yearly low and entering an oversold zone last month.
The overall impact this year has been limited
Despite the “September Curse” trend and increased volatility this year, analysts don’t believe gold’s overall upward trend will be significantly affected. Here’s why:
Central bank buying continues to support gold, driving the first wave of price increases this year. UBS believes the rationale for diversification remains valid, and official gold purchases could rise further.
The Fed is expected to start cutting rates this month, which might spur Western investors to drive gold prices to new highs, as they hedge against U.S. economic downturns and anticipate Fed rate cuts. Natixis’ precious metals analyst, Bernard Dahdah, forecasts an average gold price of around $2,600 by 2025.
Historically, the end of the year is bullish for gold. Over the past 15 years, gold futures have risen in 13 of those years, often climbing from early November through the New Year after a brief pause around Thanksgiving.
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