Every year around the month of May, scores of traders, investors and others in the business pack up and leave for vacation.
While they enjoy the getaway, the precious metals market takes a nosedive because lower volumes are being exchanged compared to the rest of the year. This phenomenon is called the “summer slump,” and it typically takes place in May, June and July.
Traditionally, gold’s strong period begins in early August into autumn and through the winter.
Starting in September and lasting until the end of the year, gold jewelry sales historically begin to pick up for three key reasons:
- Autumn festivals and the wedding season in India (only recently surpassed by China as the world’s largest consumer of gold)
- The Christmas holiday in Western nations
- Preparation for the Chinese New Year in January
But how is the investor supposed to get through the summertime blues?
In short, by doing nothing.
The ‘Slumpless’ Summer of 2014
Traditionally a slow period for gold, the last few months have been fairly active. In fact, the difference between July’s high and low was the narrowest in seven years — since right before the global financial crisis struck in 2007.
So what’s the deal?
For one, global tensions have certainly had a buoying effect on the usually-lackluster market this time of year. The conflict between Ukraine and Russia, the violence in Iraq from ISIL (formerly ISIS), the escalating turmoil on the Gaza strip, and even the recent Ebola scare in Africa have all increased gold’s appeal as a “safe haven” asset, which has helped offset normal seasonal decline.
In addition, while the economy does seem to be improving, it’s happening much slower than the Fed anticipated. United States retail sales increased by a disappointing 0.2 percent last month, according to a new report by the Commerce Department.
That, along with weak mortgage activity, suggests that the U.S. is stumbling into recovery rather than racing there. As a result, investors feel confident that the Federal Reserve will not rush to raise interest rates after ending its monthly bond-buying stimulus program in October.
How To Come Out of a Slump Alive — Nay, Ahead
A seasonal slump may not be something investors become giddy about, but many experts agree it actually plays an important, even healthy role in the economy. An occasional streak of depressed prices acts as a “check and balance” on the market, preventing rampant growth that might otherwise culminate in a crash.
Also, for gold investors, a slump represents a great buying opportunity. By purchasing fundamentally well-performing gold stocks or physical gold at the lowest prices they will be all year, smart investors are sure to be rewarded later on.
During times like these, the wise investor doesn’t get spooked, but recognizes the seasonal trend as a temporary one, and holds tight. In other words, keeping a long-range perspective is necessary for getting through the summer doldrums.
As Mercenary Geologist Mickey Fulp put it in an interview with The Gold Report: “’There ain’t no cure for the summertime blues.’ Except that…‘Time is on my side, yes it is.’”
Gold bullion provides ultimate security and long-term stability during turbulent times. Order your safe haven at Provident Metals today.
What other factors are keeping the price of gold up this summer?
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