Is Gold Destined For Summer Doldrums In 2019?

| July 12, 2019 | 0 Comments

physical goldEvery summer, gold traders tremble in fear of “the summer doldrums”.  Newcomers to the gold scene might be asking whether the summer doldrums are a real thing?  While old-timers might ask: “Does it look like we’ll get those this year?”

Here’s a 1-year chart of GLD – guess for yourself on each question, then your friendly Gold Enthusiast will weigh in.

GLD Chart

As you can see, the recent gold rally is no joke.  It almost looks more like a Bitcoin rally in miniature — haha.  (Longtime readers will know The Gold Enthusiast is not a true Bitcoin fan.)

But first, let’s examine this whole mythological summer doldrums idea.  The summer doldrums are called that because all the big retail news about gold happens in other times of the year.  In the Fall, it’s India buying gold preparing for marriage season.  In the Winter and Spring, it’s marriage season itself, along with Christmas and New Year holidays in the West.  Then in Spring, there’s gold gifting season in India and parts of the Middle East.  And for some reason, Russia always seems to be buying gold for their central bank reserves in December.  Then in January, there’s a burst of New Year optimism, with manufacturers projecting their gold use for the year.

But in summer, there’s – just not much.  Not much news, other than July earnings season in US markets, which is a snore-fest by US earnings season standards.  That’s where the idea of summer doldrums comes from.  It is a thing – it’s when the gold market kinda goes news-cold.  Not that nothing’s going on, just that relatively there’s not much to put gold on the front page on a known, repeating basis.

Which brings us to this year.  This year we have some geopolitics!  And as we all know, geopolitical uncertainty is a big driver of gold prices.  The 1-year chart of gold above shows a dip from July through August, then a slow gradual sideways move until December.  That was owning to a lack of good news from the retail markets as well as a lack of uncertainty in geopolitical terms.

Then came December when the picture for gold brightened up.  A lot.

Now as we head into this summer, we have quite a bit of uncertainty.  Yes, it looks like we have a truce in the US-China trade war.  But in the meantime, Iran rattled a few modern sabers, with some actual missile firing and ship-attacking.  And the US responding more with words and economics than with shooting.  So while this-all gets sorted out, we have – geopolitical instability.

And we’re into summer this year from a much higher price level.  Which either adds to the upside potential, or to the size of the downside slump, depending on which way you want to call it from here.

So the answers to our original questions were Yes and No.  Yes, the summer doldrums in gold are a real thing.  And No, it doesn’t look like we’ll have those this year.

Signed,

The Gold Enthusiast

DISCLAIMER: The author is long the gold sector via small positions in NUGT, JNUG, a few junior miners, and covered calls on part of the NUGT position. He has no plans to trade these in the next 24 hours.

Note: This article originally appeared at The Gold Enthusiast.

 

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Category: Commodities

About the Author ()

Mike Hammer has had a wide-ranging career, with trading and investing as a continuing theme. Mike graduated from UC Berkeley with a business degree, then worked with Macy's in their operations arm. He left Macy's and spent a summer trading his own account, which taught him a lot about trading in general and markets in particular. Trading through the Black Monday and the Crash of 1987 showed him how most people are unprepared for upheavals in their trading. He then joined Waddell & Reed as a financial advisor, helping regular people understand their finances and meet their life goals. Then came the usual story - Mike met and married the lady of his dreams. They moved to upstate New York, where Mike worked first for a small manufacturing consulting company, then Cornell University. While loving the work and the higher-education atmosphere, Mike missed the world of finance. Eventually, he signed up for stock trading coaching with the Adam Mesh Trading Group, to learn from people who understood modern markets. Within a year, Adam asked Mike to become a stock trading coach. Since then, Mike has trained over 200 individuals, spoke at several national conventions, and is a frequent contributor to conference calls across the Adam Mesh community. Mike writes The Gold Enthusiast daily newsletter, runs the Golden Hammer trading service, and participates in the Mesh Private Portfolio. He also keeps a position in international education which keep him in touch with "the student mindset". Mike closely follows the gold, energy, and financial sectors. His motto is "Plan your trade, then trade your plan!"

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