October, not September, typically bad for gold

Brace yourself, gold traders: October is right around the corner.

And it is the worst month of the calendar for gold.

To be sure, most gold traders already have their hands full dealing with September, which has been a sobering one for the yellow metal. Even after Tuesday’s 3.6% rally, bullion is down 10% for the month.

They probably can’t wait for the month to be over.

But consider October’s track record. Over the last three decades, the London PM Fixing Price in U.S. dollars terms has lost an average of 0.9% during October. That compares to a 0.6% gain in all other months. That difference of 1.5 percentage points is statistically significant.

(By the way, I didn’t go back further in the historical record because it was only in the mid 1970s that it became legal for U.S. citizens to own gold.)

What accounts for gold’s seasonal weakness? One theory focuses on gold’s historical tendency to move inversely to stocks. Since October is often when stocks hit a tradable low and begin a strong rally, that’s when money tends to flow out of gold into stocks.

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