September 2024 - Week 2 Edition

September is Strongest Month for Gold, Weakest for Stocks

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 18^th, 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 30^th) 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.

Gold Passes Euro As Second-Biggest Central Bank Holding - Behind Only the U.S. Dollar

The U.S. Dollar is still the major reserve currency held by global central banks, representing about half of all holdings. Only seven other paper currencies qualify as official foreign exchange holdings, in this order – the euro, Japanese yen, British pound, Canadian dollar, Chinese renminbi, Australian dollar and Swiss franc – plus gold bullion. For years, there was more total value held in euros than gold but since 2013, the total central bank holdings in euros have shrunk sharply and gold has now surpassed the euro as the number two holding by global central banks.  This demonstrates that central banks have been voting for the world’s oldest and best currency, gold. As I have said for quite some time, if gold is good enough for countries around the world to invest in, you should be adding it to your portfolio on a regular basis, as well. Call our professional representatives today to ensure you have gold in your portfolio or IRA and consider looking into rare coins, which have shown an even greater value increase than bullion gold in many cases, like our 20/20 program recommendations.

In the first half of 2024, central banks added 483 more metric tons of gold to their coffers, five percent above last year’s first-half record of 460 metric tons. In each of the last two full years, central banks added over 1,000 metric tons of gold to their foreign exchange reserves, selling U.S. dollars and euros. This means they trust gold to hold its value more than their own national paper currencies.

No other commodity is allowed to serve as foreign exchange – not platinum, silver, copper, crypto-currencies or rare earth minerals with much higher prices (but also much higher market volatility). Gold has price stability, with very few added tons capable of being mined each year.

Since the Great Financial Crisis of 2008, central banks have added more gold consistently and strongly, so much so that gold’s percentage of total central bank reserves has grown from 11% in 2008 to 18% in 2023.  The euro’s percentage of central bank holdings dropped to 16%, so gold is now “#2 and trying harder.” The dollar’s percentage is still #1 by a large margin but has dropped from 60% in 2001 to just 48% in 2023, or less than half of all foreign reserves, and is still falling.

In the past two years, since September 18, 2022, the U.S. Dollar Index (DXY) has been down 10%, from 113.2 to 101.6.  The dollar rallied earlier this year on the sustained and artificially high Fed funds rate of 5.25% to 5.50% (in effect since July 2023). Now, with the likelihood of the first official Fed rate cut next week, on September 18^th, fewer foreign investors are expected to buy into the lower rates on U.S. dollars, especially with the soaring trillions of dollars of new Treasury debt offerings each year, as both political parties spend with abandon, no matter who wins this November.

So central banks are hedging their bets against all major global paper currencies with more gold. Remember, you should act like a central banker and trade your dollars for gold every few months.

Gold Keeps Gaining As Investors Seek Refuge From Global Issues

Gold Rose Wednesday, September 11, despite a “tame” Consumer Price Index (CPI) report, since gold is far more than just an inflation hedge, especially this year, with huge budget deficits, a contentious presidential election, escalating global conflicts, and now a sinking dollar with the predicted Fed rate cuts coming next week. Gold reached $2,530 Wednesday morning before retreating. Silver shot right past $29 an ounce. For the first 10 days of September, gold is up 1.85%, while all the major stock market indexes are down by 2%.

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