July, August and September are typically gold’s strongest performing months.
But gold dropped 2.7% in July, and barely managed a gain in August.
Gold futures inched higher on Monday as investors sought safe-haven assets amid increased tensions between Ukraine and Russia, after fighting intensified over the weekend.
Gold for December delivery rose slightly to $1,288 on Monday and historically holding gold going into September reaps investors a more than 3% return.
In this video Bloomberg’s John Dawson explains that the September move up comes as buying from Asia – particularly due to upcoming festivals in India – increases.
That pushes up premiums paid for gold. On the Shanghai Gold Exchange premiums improved to above $7 an ounce last week, but that’s still a long way away from the $37 surcharge when gold was trading around $1,200 last year.
While gold traders in India are now asking for $13 an ounce over the London price, premiums inside the country rose to a whopping $170 an ounce a year ago at the height of the country’s gold import restrictions and ahead of the all-important festival and wedding season.
Not everyone is convinced that this year the gold price will follow the same pattern in September.
A recent note from investment bank analysts at UBS argues September 2014 may turn out to be a particularly weak period for the gold price:
“Barring a move to $1200, physical demand from China is likely to remain quite subdued in the months ahead. This means that gold is lacking physical support from its biggest physical market, implying that the seasonality trade for September – gold’s best performing month historically – is unlikely to follow its long-term trend.”
Image by Edson Walker
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Not a good start to September for Gold