The holiday season is the time that gold literally shines because it is when gold jewelers have their highest sales. It begins with Ramadan, the Muslim holy period that starts next week, and it continues through wedding season in India, then the Diwali festival in November, until the U.S. holiday shopping time. China has its own gold season during this time, often exchanging the precious metal during its National Day and Chinese New Year celebrations.
For more than forty years, September has been the month that gold stocks and gold peak. The spot gold price in September usually rises to 2.5 percent over what it was in August. Since 1989, the price of gold has risen in 17 of the 21 years. September 2009 was particularly successful because spot gold prices rose almost six percent.
Using the NYSE Arca Gold Miners Index as a yardstick, gold stocks do even better than spot gold during the month of September. The increases typically begin in August and jump to 8.3 percent during September. Again, September 2009 was a banner year, with a 14.5 percent increase. This index has increased 12 times and decreased only five in each September since the year 1993.
Since gold stocks provide leverage to the price of gold, the similar trending makes sense. The upward trends usually occur between the middle of July and early in October. Since the bull market for gold began in 2001, the gold price has risen by an average of 12.4 percent during this season, while gold stocks increased by an average of over 26 percent.
The trend is already beginning for 2010, with July lows and an increase of over four percent through the first week in August. Some analysts predict that gold will be priced at $1,300 per ounce by November 2010, due to seasonal demand. They also say that in relation to gold bullion, gold equities are inexpensive. Some of the largest have price earnings ratios that fall below the average of the S&P 500 Index. Since 1971 when the price of gold was deregulated, gold stocks usually outperform this index when the government is facing a budget deficit.
Source: Holmes, Frank. U.S. Global Investors. Ready, Set, Gold: Best Months Are Just Ahead.
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