(Frank Holmes, CEO and chief investment officer of US Global Investors) – Last week I wrote about the historic correlation between the month of September and the strength of gold. Now it appears that this September might be shaping up as one not to remember but forget.
Ten days into this year’s month, the precious metal has lost 2.6 percent, slipping from $1,288 to $1,254. As I pointed out last week, a dip such as this might be common in other months, but it’s somewhat rare in September. In the last 20 years, there have been only five Septembers in which gold prices ended lower than they started: 1996, 2000, 2006, 2011 and 2013.
So What Gives?
When the dollar does well, many investors choose greenbacks rather than yellow metal as a reliable safe haven from volatility. This month, the inversion has only intensified as the U.S.’s ISM Manufacturing Index for August rose to a three-year high of 59.0, strengthening the dollar.
Another factor weighing on the metal is the weakening euro, which statistically has the opposite effect. When the euro is down, so too is gold because dollar-denominated gold becomes more expensive for Europeans and other non-Americans. Recently the eurozone’s currency hit 14-month lows against the dollar.
Again, even though this particular September has thus far fallen below expectations, we remain bullish on gold…
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