We’ve seen a tumbling stock market so far in September, plus a strong recovery for gold this week. This is par for the course in September, the weakest month of the year, historically, for stocks over the last century, while it is usually the strongest month for gold. That’s because September tends to be the month when jewelry fabricators buy up a store of the precious metal for fabricating new designs for fall and winter gift-giving holiday events, not just Christmas and Valentine’s Day in the West but Diwali in India (November 1), the Chinese New Year’s celebration (January 29, 2025) and then Ramadan (February 28 to March 29).
Historically, since gold was set free from central bank control in 1971 and allowed to float on foreign markets with large buy and sell orders based on supply and demand, September has averaged 1.7% gains vs. about 0.5% average for the other 11 months and 7% overall annual gains. In contrast, September is the worst month of all for stocks, averaging -1.2% over the past century. In the first 10 days of the month, stocks are down by 2% and gold is up almost 2%.
This September, gold will also probably be aided by the first Federal Reserve’s predicted rate cut next week, on September 18th, plus the dismal prospects for the next Presidency. We also see global wars escalating. Our federal deficit spending is approaching $2 trillion at the end of this fiscal year (September 30th) with seemingly little intention by either party of bringing spending under control.
The stock market has sagged in September and October for a long time. According to Ned Davis Research, in the past 123 years – 1900 to 2023 – the Dow Jones Industrial Average fell an average of 7.8% from its summer peak to its fall low, with most of the decline coming in September and October. This has been true in the two most recent presidential election years, too, pitting Donald Trump vs. Hillary Clinton in 2016 and Joe Biden in 2020, with a small 2% decline in September/October 2016 and a stiffer 6.6% decline in September/October 2020. By contrast, gold rose in all six of the last election years.
Gold Rose Significantly in Last Six Presidential Election Years
Interestingly, if gold rises just about $60 from here, it will be up more than 24.6% for 2024 – or more than in the 2020 Presidential race between Biden and Trump – delivering better gains each election year.
