What the Love Trade means for September Gold Values

September Gold Values

Some individuals buy gold out of fear of war or poor government policies, they view the the precious metal as a safe haven during times of crisis. However, there are often other factors beyond wars or governments driving the value of gold. One of these factors is know as the “Love Trade”. The Love Trade consists of groups that purchase gold for loved ones during important holidays and festivals. Historically, September has been gold’s best month of the year. Looking at more than four decades of monthly returns, the precious metal has seen its biggest increase this month, averaging 2.3 percent.

Indians will be getting ready for their wedding season that begins in October followed by the five-day Hindu festival of lights, Diwali, which is India’s biggest and most important holiday of the year. In December, millions of people will be gathering with loved ones to exchange gifts as they observe Christmas. And finally, millions will celebrate Chinese New Year at the end of January 2014.

In India, there’s also the harvest season to consider, as its crop production relies on rainfall for water. Frank Talk, writer for US Funds states that “One positive driver for gold this year is the fact that the country has had a heavy monsoon. The rains that started in June covered most of India at the fastest pace in more than 50 years. About 70 percent of the annual rainfall in India happens from June to September, and a strong monsoon season usually means a bumper crop, which boosts farmers’ incomes.”

That could increase gold buying as well, negating the government’s efforts to quell India’s gold-buying habit. Historically, good monsoon seasons have been associated with strong gold demand. “In 2010, the last year that rains were heavily above average, demand soared 37 percent in the fourth quarter after harvests”.

In the rural areas of India, there is little access to banking networks, so gold is used as a store of wealth, says Reuters. And with half the population in India employed in agriculture, it’s no surprise that 60 percent of all the gold demand in the country comes from these rural areas. India’s rural community has seen a “hefty rise” in income this year, reports Mineweb. But instead of buying gold, Mineweb says Indian farmers may purchase land due to gold in local currency reaching “dizzying heights.”

Resources: US Funds, Reuters, Mineweb