In this post, I want to discuss what I believe we can expect from gold and silver prices this summer, as well as various factors that will influence their prices. Additionally, we are going to look back at summer activity in years past.
In sum, I expect both gold and silver’s price to remain elevated throughout the summer months.
I’ll get into reasons more in a minute, but first it’s important to discuss the seasonality that we tend to see in both gold and silver prices.
Simply stated, during summer, historically, it tends to be a quiet period for both gold and silver, in terms of price swings, and the stock market as well. There are different drivers for gold and silver as many are probably aware, but the reasoning behind the slowdown is pretty simple: many traders tend to take vacation and the volume of metals traded is lower. In addition, to compound the problem, individuals who stack the metals tend to spend more in the summer on those family trips, barbeques and other things.
Still, it’s important to point out that seasonality is something that could easily be crushed if the right market forces take effect. For example, gold price is mostly driven by fear. If this summer we see riots around the United States in regard to the election or tensions escalate in the US, we could surely see another breakout in the price of gold.
Gold price seasonality tends to be a little trickier than silver, as silver is driven mainly by industrial demand while gold is driven by fear and central bank buying.
This raises the question then what is the best time of year for silver price?
Typically, we see the best time of year for silver is the early months of the calendar year, more specifically Jan- Apr. We’ve seen this historically, and the reasoning is pretty simple, in the beginning of the year budgets are released for companies. Knowing the amount that can be spent for silver, companies will place their orders for silver. It’s important to note this occurs regardless of price. And if you’ve ever worked in a large or mid-size company, you’ve probably noticed this. Often, from my experience, hiring freezes in the last few months of the year as many departments have already spent their allotted budget for the year.
That said, silver and gold could very possibly breakout in terms of price this summer much higher, but I expect prices to remain elevated and maybe even fall a bit.
This is for several reasons.
The first is that by all accounts, the Federal Reserve is not going to be cutting rates anytime soon. They almost definitely won’t do it this simmer, and it looks like we probably won’t get any this year at all. This important because it should keep us essentially in the same place in terms of price. Our debt is growing exponentially and there is currently no plan in place to fix it. (Could A debt Jubilee happen- Read Here) The general public seems to be aware of the inflation issue, but many are not aware of the debt issue in the economy. It seems like to me, many people won’t become aware until it is too late.
The second reason gold and silver prices will probably remain pretty flat is that it is an election year. Simply stated, the federal government is going to continue to spend recklessly so that they can artificially boost the economy. This will have the effect of keeping prices stable for the time being and more importantly probably prevent any sort of economic crisis from happening. This might not happen though as our economy is in a very fragile state.
Will We Have a New Inflation Target of 3-4%
Some say that since silver and gold shot up in price in May 2024, that the trend doesn’t apply anymore. In other words, the rules that define gold and silver prices we can begin to ignore. Although one year is just a blip, it’s important that we explore how silver and gold prices have bucker some usual price trends.
For example, in the beginning of the year in 2024, there were calls for 6-7 rate cuts from the Federal Reserve. As the months, progressed though and inflation data kept coming in hotter and hotter than expected the belief for 6-7 rate cuts was cut to 4-5. Then, as more hot inflation data came in there was a prediction for a rate cut in 2024. Again, hot data in April, pushed the expectation that we might just get one cut this year, either in the fall or in December. People like me though are skeptical that we will get any at all in 2024. A rate cut too close to the election could be seen as a political move by the Federal Reserve and it is probably just easier for them to wait until 2025.
In normal times, the possibility of rate cuts decreasing and decreasing throughout the year is usually a bad sign for gold and silver prices. This is because as rate cuts occur, it makes Treasuries less attractive for foreign investors -since the yield is lower with lower interest rates- and it makes precious metals like gold and silver much more attractive. In 2024, we didn’t see the price of gold or silver decrease when inflation data came in hotter than expected. Conversely, we saw the price of gold increase. This is mostly likely due to Central banks buying gold and tension around the world. Not to mention the endless money printing by the US government.
As we can see the normal rules of how precious metal prices behave in the summer could very well change in the summer of 2024. There’s much reason to believe that either a very adverse economic event could happen, or we could see political unrest in the United States or the rest of the world. I suppose you could say we have that already, but if things get worse, we can expect that precious metal prices could see a summer bump in price.
In sum, I believe summer will be a good time to buy precious metals. Prices won’t skyrocket and premiums will probably come down as well.
Thanks for your time.
