The current year was not exactly sparkling for gold investors. Furthermore, the price seems pegged near a multi-year low. However, the month of September could bring relief for the gold price, several factors speak for it.The seasonality of the gold price over the past years speaks a clear language. On average over the past three decades, prices have climbed upwards with good regularity. The price changes in the majority of the years run exactly the same as on the stock market. While the month of September is often associated with declines, the precious metal market shines towards the beginning of the fall mostly golden.
Physical and “mental” demand increase
The causes, according to experts, are mostly the same, but this year there is still a potential factor. Like many of his colleagues, Dirk Baur, a finance professor at Western Australia Business School, sees many of its investors as hedging companies for many investors who fear falling share prices in late autumn. He describes this as the “golden autumn effect” for the precious metal. The wedding season in India also regularly raises the price of gold. Here simply the demand for “physical” gold for jewelry rises.Baur also sees an equally seasonal but differentiated effect: the shorter days in the fall, the general sentiment in the market is negative, and this in turn lead to stronger purchases of the “crisis” investment gold.
Gold-silver ratio getting higher
In the fall of 2018, there is another aspect that argues that the prolonged price decline in gold can at least be followed by a short-term price recovery: the gold-silver ratio, ie the ratio between gold and silver, is as unfavorable for gold as it has been for years , Currently, 83 ounces of silver have to be paid for one ounce of gold, a higher value than in years. From experience, silver tends to be weaker in weaker phases than gold. The conclusion of the experts: The entire precious metal market is oversold, which promises upside potential for both precious metals.
Professionals in the starting blocks
Professional investors have dealt with the falling gold prices quite differently in recent months. While hedge fund investor John Paulson has kept his holdings of gold ETFs and futures contracts completely, other investors, such as George Soros’s fund, have since cashed out. They could now be ready to re-enter – more ammunition for a gold price rising soon. In any case, the first indications are that the inflows into exchange-traded gold products (ETPs) in international trading venues are already rising again.