September's Financial Peculiarities: Gold Shines as Stocks Wane
Updated
September is well-known in the world of finance for its distinctive seasonal trends, some of which have substantial statistical and theoretical backing that can warrant strategic investments.
One of the most widely recognized adages associated with September is its reputation as a challenging month for stock markets. What might be less familiar, however, is that it happens to be the most favorable month of the year for gold.
Let's examine the performance of gold since December 31, 1974, the date when U.S. citizens were granted the legal right to own gold. Over this period, the price of gold bullion in U.S. dollars has displayed a remarkable pattern, with an average increase of 1.8% in September, a figure more than four times higher than its average return of 0.4% during the other 11 months of the year. In stark contrast, the Dow Jones Industrial Average has experienced an average decline of 1.0% in September starting from 1975, while it has seen an average gain of 1.0% in all the remaining months.
XAUUSD BUY LIMIT 1911 - 1913🕯
✅ TP1: 1917
✅ TP2: 1922
⚠️ SL: 1907
One of the most widely recognized adages associated with September is its reputation as a challenging month for stock markets. What might be less familiar, however, is that it happens to be the most favorable month of the year for gold.
Let's examine the performance of gold since December 31, 1974, the date when U.S. citizens were granted the legal right to own gold. Over this period, the price of gold bullion in U.S. dollars has displayed a remarkable pattern, with an average increase of 1.8% in September, a figure more than four times higher than its average return of 0.4% during the other 11 months of the year. In stark contrast, the Dow Jones Industrial Average has experienced an average decline of 1.0% in September starting from 1975, while it has seen an average gain of 1.0% in all the remaining months.
XAUUSD BUY LIMIT 1911 - 1913🕯
✅ TP1: 1917
✅ TP2: 1922
⚠️ SL: 1907
Note
Naturally, the Dow Jones Industrial Average has a much longer history than the period starting from 1975, and even over this extended timeframe, September has consistently held the unenviable position of being the worst-performing month. Since its inception in 1896, September has demonstrated an average loss of 1.1%, a stark contrast to the 0.8% average gain seen across all the other months. This persistent underperformance in September is particularly noteworthy; it has consistently ranked below average relative to the other 11 months in nearly every decade since 1900, with only one exception.Note
Gold's performance in September exhibits some inconsistency. Historically, up until approximately a decade ago, September held the title of being the most favorable month for gold. However, the situation has reversed since then, and September has transformed into the least favorable month. This recent shift diminishes the statistical argument supporting gold as a standout performer in September, although it doesn't entirely negate it. When examining the entire period since 1975, the statistical evidence is only marginally significant, reaching the 90% confidence level rather than the customary 95%.Note
No matter how convincing the statistical evidence supporting a seasonal pattern may be, it's unwise to wager on its persistence unless a logical theoretical explanation can be established for its existence.My stance on the absence of such an explanation for stocks had remained steadfast for years. However, a recent study published in the Journal of Financial and Quantitative Analysis has compelled me to reconsider. Titled "Seasonal Asset Allocation: Evidence From Mutual Fund Flows," this study was conducted by a team comprising Mark Kamstra from Canada's York University, Lisa Kramer from the University of Toronto, the late Maurice Levi from the University of British Columbia, and Russ Wermers from the University of Maryland. Their research has uncovered compelling evidence indicating that the root cause of September's underperformance in the stock market can be attributed to Seasonal Affective Disorder (SAD).
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