With all this jubilant summer outdoor activity and focus, it is not surprising the Gold price is in the ‘summer doldrums’. But it seems a little more marked this year…

 

This settled weather is truly a blessing, enabling a level of outdoor activity and play amongst us usually hard-working Brits that has been beautiful to behold. Then there’s the World Cup. I’m not a football fan but to the many of our readers that are, I hope you’ve had a brilliant time watching the England team do their nation proud.

“Gold has been afflicted by relentless selling over the past few weeks or so, forcing it to major lows. While summer-doldrums weakness is typical, gold’s recent drop is on the large side even for this time of year. It was fueled by truly-extreme short selling by gold-futures speculators, which is quickly exhausting. That is paving the way for gold’s major autumn rally to start marching higher any day now, a very-bullish omen.

The first halves of market summers including June’s and early July’s have long tended to be the weakest times of the year seasonally for gold. They are simply devoid of the recurring seasonal demand surges gold enjoys during most of the rest of the year. With investors not interested in buying, gold languishes,” (Market Oracle).

 

2002 Proof Coin with original certificate

 

Purchase Cycles

There are no major income-cycle or cultural drivers of outsized gold-investment demand during these vexing summer doldrums. Many investors are mentally checked out, enjoying the summer vacation season with their families. So gold usually drifts listlessly sideways to lower in early summers. Sometimes enough bearishness coalesces to catalyze significant selling, which is certainly the case this year.

So, this known now is a savvy time to get in some extra precious metals purchasing. In many ways, these summer doldrums are giving a false signal to the real movement potential for Gold when the markets return in full force in late August / early September. I give this date because the market summer is considered June and July and some of August. September is typically see a rise in Gold prices. 

 

Cargo Ship with shipping containers

 

Trade War Predictability

The real movement potential is up, due to the rising and significant trade war escalations which are now in solid early steps. We’ve spoken about this occasionally over the years. It always seemed the stuff of the far distant future but its now here:

“A fresh wave of risk aversion swept across financial markets after the United States threatened to impose tariffs on an extra $200 billion worth of Chinese goods. This unfavorable move comes just days after the two countries slapped tit-for-tat tariffs on $34 billion worth of each other’s imports. With Beijing describing the latest tariff threats as “totally unacceptable” and vowing to fight back, concerns are likely to heighten over a full-scale trade war becoming a reality. With escalating trade tensions between the world’s two largest economies presenting a significant threat to global economic growth and stability, there are no winners. Investors are likely to maintain a cautious stance for the rest of the trading week with global sentiment expected to remain fragile,” (Action Forex).

I have always believed that it is crucial to read from both those who are bullish on Gold and those who dislike the “barbarious relic”. There has never been a time when we are so quickly entombed in our own echo chamber than in our own search-engine repeated reality. It is well-proven that the search results we read are determined by pages previously clicked, keywords we typed or even speak near our phones. So, it takes the determination of a salmon in breeding season to swim against the tide upstream and actively ensure we expose ourselves to a variety of viewpoints on precious metals. 

 

1oz Gold Krugerrand Assortment

 

Irrational Thinking

Proactive Investor sees it like this – gold has now begun the slow slide that was always inevitable in a rising interest rate environment. On 28 June the price hit a six month low of US $1,249 per ounce, with further selling pressure likely. After all, with the yield on the US dollar rising, the economic rationale for holding gold is diminishing by the day. But, as is often the case with the barbarous relic, things aren’t quite that simple. 

In the first place, buyers of gold aren’t necessarily motivated by any kind of economic rationale. More often, it’s the opposite, naked fear. When fear trumps reason, investors buy gold. And while rate rises might mitigate economic fears, there are other kinds of fear: political, military, social, cultural.

I’m inclined to agree. Outside of their tone, they are correct in that fear feeds the upward price of Gold. But I disagree with their conclusion. Yes, fear can feed the price of Gold but also so can reason. The two are far from mutually exclusive. In fact, fear is an incredibly reasonable emotion. It’s there to protect us. What I think the article, therefore, means by fear is “irrational fear”. Most of the time, fear is astutely rational and to not fear what on rationality is an absolute inevitability is actually the definition of irrationality. 

For example, to fear the collapse of a fiat currency is not irrational, based on the current facts. To not fear it is irrational. That is akin to standing on a frozen lake with the temperature at 0 degrees and rising by 1 degree every 10 minutes. To not fear you’ll fall through would be irrational, as your mind would have to ignore the fact that ice melts at a scientifically proven temperature. The same is true of the price moves of Gold. One would have to ignore the historical cycles of when currencies collapse and the devaluation effects of quantitative easing. However, to fear the collapse of a currency continuously without sleep, while the global economy still has three legs of its table, for example, would be to not enjoy a beautiful summer! It’s just worth glancing up now and again at the news.

As my midwife said during the first night of my premature son’s life “Don’t watch a newborn baby breath. Get some rest, you’ve earned it.” I didn’t sleep. I stayed up all night watching him (but not scared). Some of our readers love watching the markets because it’s their passion. The trick is not to allow yourself to get stressed!

To obtain ‘true’ money, contact one of the Bleyer team now on 01769 618618 or email sales@bleyer.co.uk and begin or increase your holding in Gold and Silver bars and coins.

 

Globe with sunrise

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