Every 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.
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 brighted 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.
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.