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Behavioral Economics

September is Often Favorable for Gold and Silver

From September and into early October, gold and silver usually rise in price. However the stock market often recedes. There are obvious reasons for this, which underlie basic human psychology. Behavioral economics account for the real reasons behind market moves because people’s innate motives override statistical speculations.

Silver is entering its “sweet spot” of the year. This September, silverhas another special reason for rising – rising industrial demand.  Since 1975, silver has gained an average of 4.1% every September, making September far and away the best month for silver.(Second place is January, at +2.9%.)September is also the #1 month for gold, due to the beginning of the jewelry fabrication season for the gold gift-giving holidays in India (Diwali, followed by the wedding season), America (Christmas, followed by Valentine’s Day) and China’s New Year. Silver often follows gold’s lead – as silver often acts like “gold on steroids.”

Silver Typically Soars in September

Volatility usually surges during the months around August and September, which explains the obvious. Investors—from hedge fund managers to individual traders—instinctively find refuge placing their assets in the longstanding safe havens of value. Precious metals and bonds are fundamentally deemed ‘secure’ when market uncertainty persists. Because gold and silver often do the inverse of the equities market, as retail and other industries sell-off, precious metals rise.

September, of course, has a bad reputation for stock returns. Since 1950, it has been the worst month for the S&P 500, which has fallen an average of 0.5% during the month, Ryan Detrick, senior market strategist for LPL Financial, noted in a blog post. September’s record has been a bit better recently: Over the past 10 years, the S&P 500 has averaged a 0.9% gain in September.

History Says September Will Be Rough for Stocks. How to Invest for an October Turnaround.

Gold and silver preserve the purchasing power of the dollar as it loses value. After all, the U.S. dollar is fiat, meaning it’s backed by nothing. Before 1971 United States currency was allocated at 40% in physical gold and silver. When President Nixon took us off the gold standard on August 15th, 1971, the government’s promise was that it was “temporary”—the perfect statement that means the total opposite when coming from the state.

Nonetheless, upon the fall period from October through December, retail and other sectors usually outperform. These are often the best three months out of the year for stocks since the holidays bring buyers to stores and the season heads into winter. It’s the harvest time for rest and rejuvenation. People become more internal toward materialism, thus causing them to spend more. It’s only behavioral psychology.

I will be watching gold, silver, platinum and palladium closely for the next three months. Now is by far the most important time to be vigilant concerning precious metals—the classic safe-haven for people’s assets. Thus in the midst of a trade war with China, a president that violently moves markets with a single tweet, and an economy that is hang by the threads due to overconsumption, consumer debt, and a Federal Reserve that is heading back to zero interest rates—only the foolhardy will not pay attention to gold and silver.

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Image credit: Andrzej Barabasz (Chepry) [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)]

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