Gold's price is down by over 21%. Where will it head this September?

Gold has taken investors on a particularly volatile ride since the start of this year, and it appears that the volatility may not be over just yet. After climbing to a record $5,589.38 per ounce on January 28, the precious metal's price reversed course, falling substantially over the months that followed. And while there have been short periods of recovery along the way, that gap is still significant as we head into September.

As of September 1, gold's price is sitting at $4,369.19 per ounce, putting it about 21.8% below its January peak. But that price decline from the start of the year, while substantial overall, hasn't been particularly linear. Gold's price also regained ground at points along the way, including a strong run in August, only to retreat once again as expectations surrounding the economic landscape shifted.

Those swings make the outlook for September particularly difficult to pin down. After all, gold is now considerably cheaper than it was at its peak, but the forces capable of moving its price both up and down remain very much in play. So, where could gold's price be headed this September? That's what we'll examine below.

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Where will the price of gold head this September?

There's no reliable way to predict exactly where gold's price will end the month. After all, gold's recent decline doesn't necessarily mean prices will continue falling in September. There are still several factors that could push the precious metal higher or lower this month, but one of the most important will be what happens with interest rates.

Fed rate expectations shifted at the end of August after Federal Reserve Chair Kevin Warsh indicated that more action could be needed if inflation doesn't move convincingly toward the Fed's 2% target. Investors responded by increasing their expectations for a September rate hike, and the price of gold fell by roughly 3% on August 28.

Higher rates can create a challenge for gold because the metal doesn't pay interest like many other investment options, like certificates of deposit (CDs) or high-yield savings accounts, do. When rates rise, investments that do offer a return, such as bonds, can become more attractive. That can reduce demand for gold and put downward pressure on its price.

But whether the Fed actually raises rates in September could depend heavily on the economic data released before its next meeting. New inflation and jobs reports could give policymakers a clearer picture of where the economy is headed. If inflation remains elevated, the case for higher rates could strengthen, potentially creating more pressure on gold. Signs that inflation is easing or the economy is weakening, however, could shift expectations again and give gold prices room to recover.

The U.S. dollar will be another factor to watch. Because gold is priced in dollars, a stronger dollar can make the metal more expensive for buyers using other currencies, which can weigh on demand. A weaker dollar, meanwhile, could provide some support for gold prices.

Geopolitical developments could pull gold in the other direction. Investors often turn to gold during periods of heightened global uncertainty, and ongoing tensions involving the U.S. and Iran could increase demand for the precious metal if the conflict escalates. But those tensions could also push oil prices and inflation higher, potentially reinforcing the case for higher interest rates.

That combination makes September's outlook difficult to predict. If rate expectations and the dollar remain elevated, gold could face additional pressure. But if economic data changes the outlook for rates or geopolitical concerns drive investors toward safer assets, prices could rebound. Given how sharply gold has moved in both directions this year, either scenario is possible.

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Is gold a smart investment in today's landscape?

Gold's 21.8% decline from its January peak may make the precious metal more appealing to investors who were priced out when it was trading above $5,500 per ounce. But a lower price alone doesn't necessarily make gold a smart investment. Whether it makes sense to buy now depends largely on what role gold would play in your portfolio.

For example, gold can provide portfolio diversification because its price doesn't always move in the same direction as stocks and other conventional investments. It can also serve as a potential hedge during periods of inflation, geopolitical instability and broader economic uncertainty. Those characteristics could be particularly useful in today's landscape, given the questions surrounding inflation, interest rates and geopolitical tensions.

But there are trade-offs to consider. As noted, gold doesn't pay dividends or interest, so holding too much of it could mean giving up income or growth opportunities available through other assets. And this year's price swings are an important reminder that gold isn't immune to substantial losses simply because it's considered a safe-haven asset.

For investors who decide gold fits their goals, a measured approach may be more appropriate than trying to capitalize on any short-term price movements that occur in September. For example, you might allocate a limited portion of your portfolio to gold or spread purchases out over time rather than investing a large amount based on where you think prices will go next.

The type of gold investment matters, too. Physical gold bars and coins, gold exchange-traded funds (ETFs) and gold individual retirement accounts (IRAs) can all provide exposure to the precious metal, but their costs, liquidity and purposes differ. Comparing those options can help you determine which option — if any — fits your investment strategy.

The bottom line

Gold's price at the start of September is about $4,369 per ounce, or about 21.8% below its January 28 record high. But that decline doesn't necessarily tell investors what comes next. The precious metal is facing competing forces, with elevated interest rates and Treasury yields potentially weighing on prices while economic uncertainty and geopolitical risks could provide support.

So, rather than making an investment decision based on whether gold appears likely to rise or fall this September, consider the bigger picture. Today's lower price may offer a more affordable opportunity to add gold to a diversified portfolio, but its recent volatility makes it important to keep your exposure measured. September could bring another rebound, a deeper decline or continued swings in both directions — and your investment strategy should be able to withstand any of those outcomes.