Gold Price Summer Doldrums
Commodities / Gold and Silver 2018
Jun 09, 2018 – 03:43 PM GMT
Early summer is the weakest time of the year seasonally for gold, silver, and their miners’ stocks.
With traders’ attention diverted to vacations and summer fun, their precious-metals interest and investment demand wane considerably. Thus this entire sector, and often the markets in general, suffer a seasonal lull this time of year.
This doldrums term is very apt for gold’s summer predicament. It describes a zone in the world’s oceans surrounding the equator. There hot air is constantly rising, creating long-lived low-pressure areas.
They are often calm, with little or no prevailing winds. History is full of accounts of sailing ships getting trapped in this zone for days or even weeks, unable to make any headway. The doldrums were murder on ships’ morale.
Crews had no idea when the winds would pick up again, while they continued burning through their precious stores of food and drink. Without moving air, the stifling heat and humidity were suffocating on these ships long before air conditioning.
Misery and boredom were extreme, leading to fights breaking out and occasional mutinies. Being trapped in the doldrums was viewed with dread, it was a very trying experience.
Gold investors can somewhat relate. Like clockwork nearly every summer, gold starts drifting listlessly sideways. It often can’t make significant progress no matter what the trends looked like heading into June, July, and August. As the days and weeks slowly pass, sentiment deteriorates markedly.
Patience is gradually exhausted, supplanted with deep frustration. Plenty of traders capitulate, abandoning ship.
Thus after decades of trading gold, silver, and their miners’ stocks, I’ve come to call this time of year the summer doldrums. Junes and Julies in particular are usually desolate sentiment wastelands for precious metals, totally devoid of recurring seasonal demand surges.
Unlike the rest of the year, these summer months simply lack any major income-cycle or cultural drivers of outsized gold investment demand.
The vast majority of the world’s investors and speculators live in the northern hemisphere, so markets take a back seat to the great joys of summer.
Traders take advantage of the long sunny days and kids being out of school to go on extended vacations, hang out with friends, and enjoy life. And when they aren’t paying much attention to the markets, naturally they aren’t allocating much new capital to gold.