CHAPEL HILL, N.C. (MarketWatch) — September is the best month of the calendar for gold. That’s welcome news to the beleaguered gold-investor community, which has had to endure a frustrating couple of months as the price of gold backed off from its early-July high of $1,374 an ounce. The nearby gold futures contract closed Thursday at $1,317. Since the early 1970s, when it first became legal for U.S. citizens to own bullion, gold has produced an average return of 2.2% in September. The average return for the 11 other months combined is 0.6%, or barely more than a quarter of September’s average gain. (See chart, above.) Gold’s seasonal tendencies, therefore, stand in stark contrast to the stock market’s, where September is by far the worst month of the calendar. To be sure, just as was the case with equities, there is no apparent reason for why gold should perform differently in September than any other month. So gold’s positive September tendencies are not, in and of themselves, a sufficient reason to improve your near-term outlook for gold. But there are other reasons as well. Read: This could be a September to remember for investors One is sentiment among gold market timers. For the first time in six months, they on average are net short the gold market, meaning they are betting on a decline. According to the contrary logic of contrarian analysis, their bearishness is a positive development. Consider the average recommended gold market exposure level among a subset of short-term gold market timers I monitor (as represented by the Hulbert Gold Newsletter Sentiment Index, or HGNSI). This average currently stands at minus 2.17%. (See chart, below.) Though the HGNSI still has a long way to fall before being as low as it was in the summer of 2015 and last December, the current reading is still a lot lower than it was in spring. In early May, for example, the HGNSI stood at 60%. In mid-June, the last time I devoted a column to gold sentiment, I concluded that sentiment was not yet positive enough to support a rally that would propel bullion above $1,300 an ounce for good. With gold unable to sustain the rally that took it in early July above $1,370, that contrarian caution appears to have been largely vindicated. Also see: Billionaire Ken Fisher says this is the most ‘joyless’ bull market in history The HGNSI, when I wrote that column, was 35%; it is minus 2.2% today. The bottom line: Gold sentiment is improving, even if it is not yet at low enough levels to trigger an outright contrarian “buy� signal. Coupled with positive seasonal tendencies, however, it may be time to give gold the benefit of the doubt.

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