(Kitco News) - Although gold continues to trade in rarefied air, its upward momentum is starting to weaken as September kicks off.
Gold has managed to hold support above $2,500 an ounce, despite some technical selling pressure. Looking ahead, some analysts have said that the precious metal could face a challenging environment, as September has been one of the worst months for gold in recent history.
So far, gold has managed to hold its ground. December gold futures last traded at $2,528.40 an ounce, up 0.21% on the day.
In a recent note, Nicky Shiels, Head of Research and Metals Strategy at MKS PAMP, mentioned that since 2009, gold has seen a decline of 2.4% in September. Meanwhile, analysts at Bloomberg note that since 2017, gold prices have declined by 3.2% during the so-called “September Curse.”
It’s not just gold; September is also a terrible month for silver. Over the past 15 years, silver has experienced a decline of 3.7% in the final month of the third quarter.
Analysts also point out that September is historically a weak month for equity markets, but surprisingly strong for the U.S. dollar.
“September is historically a month of increased volatility and reduced U.S. equity exposure/weakness,” said Shiels.
Shiels also noted that given gold’s more than 20% rally so far this year and lofty valuations in equity markets, it’s not surprising that investors are using caution as summer comes to a close.
Gold’s struggles come as the U.S. dollar, which dropped to a one-year low last month and entered oversold territory, is seeing a modest momentum shift.
While September has been a difficult month for gold in recent years, some analysts note that taking a long-term view weakens the seasonal factor. Over the last 30 years, September has actually been a positive month for gold.
Even if volatility picks up, analysts do not expect gold’s broader uptrend to end. Looking beyond short-term weakness, they have said that ongoing central bank purchases will continue to provide solid support for gold.
At the same time, investor interest is just starting to pick up as the Federal Reserve is expected to start its much-anticipated easing cycle later this month.
Looking past September’s seasonal weakness, the year-end has historically been a strong bullish season for the precious metal.
“Futures have rallied an average of 13 out of the past 15 years, and often, after a slight pause in early November, they tend to rise from Thanksgiving through the New Year,” said Phillip Streible, Chief Market Strategist at Blue Line Futures.
