October the “Cruelest Month for Gold”?
This is a test of Mark Hulbert’s post warning that next month - October - is the worst calendar month for gold.
Let’s start with the numbers. The stats below show gold’s performance in October, versus all months, since 1976:
From this 30,000 foot view, gold has indeed underperformed in October. My numbers are a bit different than Hulbert’s but I’m unclear what dates he is using in his calculations, so I’m okay with that.
Averages like these can be misleading because they say nothing about how consistent an observation has been or whether it’s waxing or waning, so below I’ve assumed a trader was only long gold in October (red) versus the average month each year (grey) since 1976.
[logarithmically-scaled, growth of $10,000]
Here we see that the underperformance in October has been fairly consistent since the 1990’s. On that I’m in agreement with Hulbert’s post.
But I would temper that by saying that that underperformance only spans the last 2 decades (roughly 24 Octobers), and 24 occurrences do not a robust observation make.
One point I disagree with is that October has been the worst month for gold. I would give that dubious distinction to March. To illustrate, below I’ve rerun the same stats for all 12 months (color coded for easier reading):
Interestingly, September has been far and away the best month for gold, but (barring divine intervention tomorrow) this year has been abysmal with gold down -11% for the month.
To Recap
Yes, gold has performed poorly in October. Temper that conclusion because of how few observations are available. I’m not uber confident that that trend continues.
March has by my calculations been the worst month for gold and September the best (but that didn’t do us much good this year).
Happy Trading,
ms
Geek note: I used the NY close to represent the price of gold until the ETF GLD became available, at which point, I switched to the ETF.
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Filed under: Time-based | 5 Comments
This year is special, as this year before SEP, gold had been rising a lot; whereas most other years, gold would only start rising from AUG, that is the reason for the outperformance of gold in SEP before.
RE to haoqi001: absolutely, the fact that September bucked the bullish trend (in a big way) is certainly a factor in this analysis. Unfortunately, with so few years to consider, I won’t speculate as to what the impact is. michael
There are other factors to consider, since the 1970s when we moved off the Gold standads, Gold has mainly trended with the increased demand in jewellery, which starts in Oct. (Diwalli) and may decline in March (Valentine’s Day). We are now in a different ballgame with currency issues.
Good to know about this “Diwalli-Valentine” cycle. However, what else can we add to understand the current trend or cycle of gold?