Gold finished September down approximately 6.2%, yet ended the third quarter up 3.3%. The Dow Jones figures refer to the front-month COMEX futures price series, which also rose in 10 of the past 12 quarters.
There is another number hidden inside those returns.
Compounding the monthly and quarterly changes implies that gold gained roughly 10.2% across July and August. September then erased about two-thirds of that advance.
Set the price at 100 at the beginning of July, and the path becomes clearer:
- End of August: approximately 110.2.
- End of September: approximately 103.3.
The quarter still finished higher. But the cushion built during the summer had shrunk considerably.
For us, that is more useful than treating a positive quarter as reassurance. The quarterly result records where gold finished relative to June. It does not capture how much ground the market surrendered along the way.
The same limitation applies to counting winning quarters. Ten gains out of twelve tell us how often gold advanced, without telling us how large the gains and losses were.
A green quarterly candle can conceal a substantial reversal within the quarter.
Gold entered October above its starting point for Q3, but with much less of its summer advance intact.
Leave a Reply