Looking ahead to September – which is historically the best month for gold prices

The gold price oscillated near $1,830 per ounce Friday morning, trading near unchanged on the day. After sliding off its $1,913 all-time high posted on Aug 22, the price of gold has been held in check under $1,850 as investors and traders weigh whether a deeper correction is in the offing.

Economic figures continue to be scrutinized for clues as to whether the recent deterioration in data is merely a pause in a recovery, or a double-dip recession is forthcoming. Tomorrow’s unemployment report from the Labor Department will offer information as to whether the jobs market continues to stagnate. The lack of job creation has helped keep central bankers in the dovish camp with respect to monetary policy – a fact that has helped boost the gold price.

Looking ahead to September – which is historically the best month for gold prices – the upcoming Federal Open Market Committee (FOMC) meeting is likely to serve as the key catalyst for the yellow metal. Michael Churchill, head of Churchill Research, wrote in a note to clients that he expects the Fed to expand its easy monetary policies at the September meeting.

“The August Fed minutes were much more dovish than I would have expected,” Churchill noted. “From the eyes of the FOMC participants, the economy is weak, inflation is firmly under control (and likely to start trending down again soon), the labor market is slack and business confidence is depressed. The FOMC’s statement that it plans an extra day at its September meeting to discuss further easing measures signals quite clearly that the Fed is likely to do undertake some form of additional easing, though probably not under the headline of QE3.”

Although Churchill did not predict QE3, he expects gold prices to remain firmly underpinned. “With the funds rate likely to be pinned at 0.25% for the foreseeable future, and with additional easing measures also in the works, the path of least resistance for gold (and by extension silver) remains upward.”

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