The summer doldrums are referred to as the seasonal trend during which the stock market either stays flat or declines. It happens in the summers, when traders go on vacation. Gold miners suffer during this period of the year as gold demand reduces. However, experts believe the demand starts going high at the end of the summer.
Gold starts moving sideways and taking silver with it during summer (particularly in June, July, and August). It has been happening for years. It happens no matter what the gold condition or trend was before summer.
June and early July are more risky months of summer doldrums in gold. Compared to the rest of the months of the year, these months do not have any significant cultural drivers or even income cycles that demand gold. However, the last three summers were a bit different regarding summer doldrums in gold. And 2021 may also become an exception.
In order to calculate the gold trends during the summer bull markets, experts need gold price-action of the year in the form of percentage terms. Experts can do it by indexing the final gold prices of the calendar year before the summer season starts. It means the last trading day of May. The indexed baseline is 100, and all gold price-action is calculated by comparing the current price to this baseline.
Therefore, if the indexed level of gold trading is 105, then it means that gold trading has improved by 5% compared to the final close of May. Similarly, if the index level is 90, then it means it has reduced by 10%. This method helps a lot with calculations. These calculations are important because the range of the gold price has been very vast over the last two decades. Gold was around $257 at the start of 2001, and it gradually reached $2,062 by mid-2020.
A total of two secular gold bulls occurred during this period. The first one reached as high as 638.2% during the 10.4 years (from 2001 to 2011). 2012 was also considered a bull year because, during this year, a drop of more than 20% into bear territory was not observed. However, the drop into bear territory happened during the second quarter of 2013, when a 22.8% drop was seen.
It formed the next gold bear years, which ended in 2015. These bull years are eliminated because it has been seen that gold acts in a different manner in the bull as well as in the bear market. It crushed gold to a new low at the end of 2015, which gave rise to the gold bull that we have today. Since then, it has moved towards balance and has never dropped by 20% plus ever again. It means from 2016 till now, the years were gold bull years. When the summer price action of gold-bull years is added to a chart after being indexed, then results are produced.
The prices of gold and silver are determined by different factors of technical as well as fundamental nature. Technical factors affect the gold price for a short duration. On the other hand, fundamental factors have a long-term effect on the prices of gold and silver.
Experts believe that summer doldrums in gold do not affect the trends set by fundamental factors, while they can change the trends created by technical factors to a small extent. If there are high chances of an increase or decrease in the prices of gold or even silver, then the summer doldrums in gold will have an effect on gold or silver.
Some people suggest investors leave the gold market in May and rejoin it again in September. But how true or effective is this suggestion? Let’s find out.
If you draw a chart of the annual prices of gold in 2018, then you will come to know that gold did face a decline in May. However, we can not say summer doldrums in gold were the main reason behind it. However, you can not ignore this concept completely, but you also can not let it stop you from making investments during summer. Many factors can overpower the summer doldrums in gold. You should also consider those factors if you are considering summer doldrums in gold.
For instance, if all the other factors point to a particular gold price pattern and the summer doldrums in gold also confirm it, then you may try to make the investment. However, if other factors are really strong and the summer doldrums tell you something completely different, then you may prefer not to take part in that investment.
It is still debatable whether this old trend of summer doldrums in gold is true or whether it is just a bias. But it is clear that today, traders have moving facilities and can invest in gold even when they are gone on vacation. However, no matter how true or bias the concept of summer doldrums in gold is, you should follow the tips mentioned below to have a better trading experience throughout the year.
Instead of worrying about the summer doldrums in gold, it is better to make knowledgeable choices at the right time. Keep adding money to your portfolio to see good results from your investment. Keep your investment fees reasonable and realistic. Put effort into holding and maintaining high-quality assets and let the time show you results.
Keep your investments simple. Avoid common problems by asking experts for help or acquiring field-related knowledge before making an investment. Such investments will mostly show amazing outcomes in the coming years.
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