Gold ETF Funds Haunted By October Losses
Investors in gold ETF funds are coming off a strong September as leading gold ETF funds, from physical gold to stock based, all experienced healthy gains. Over the last 10 plus years September has been the second best month for gold price performance so perhaps September’s results were to be expected however. If that’s the case though, watch out for October.
Here’s the September performance chart from Google Finance showing the largest physical gold ETF, the SPDR Gold Trust (GLD). It also shows the largest stock based gold ETF funds the Market Vectors Gold Miners ETF (GDX) and its small cap counterpart the volatile Market Vectors Junior Gold Miners ETF (GDXJ).
Now with October approaching and a big month of gains behind them, gold ETF funds could be in for a rough ride based off history. October is one of the three worst months for gold price performance over the last 10 plus years. It has historically been a month that has seen gold lose value on average. Here’s the 11 year monthly gold price chart from Bloomberg data.
In addition to historical patterns, one wonders whether the announcement of QE3 added psychological momentum to gold prices recently. If so the success or lack of success of this program will certainly be scrutinized in October, even if it is likely to be way too early for positive results. Could that immediate scrutiny threaten gold’s recent gains? Should October be stormy in the stock market will goodwill towards gold mining stocks evaporate? Will the Presidential election in the U.S. also play a role in gold price action? All of these questions and others will play out in October influencing gold prices.
Shareholders in gold ETF funds should be cautious over the next month as gold has run quickly and risks abound. The good news is that any declines may prove to be temporary as coincidence or not, November has historically been the best month of the year to own gold.
Source: Christian Magoon