There Ain’t No Cure for The Summertime Blues

“I’m going to raise a fuss, I’m going to raise a holler, about working all summer just to try to earn a dollar.”

It seems that at least over the last few months, gold is caught up in summertime trading pressure, leading up to today’s action: a day with very little activity or price change. In the immortal words of Eddie Cochran, there ain’t no cure for the summertime blues.

Gold futures are currently trading off by $0.40, and basis the most active August contract is trading at $1,225.20. Gold trading has been characterized by selling pressure as a result of both dollar strength and selling pressure. In 2018 gold has lost approximately 6.4%. Since mid-April of this year, we have seen gold prices decline substantially from a high of $1,369 per ounce, breaking through three levels of support in the last three months.

The first level of support was broken when gold traded and broke below $1,288 per ounce on June 12. This was followed by a break below $1,267 per ounce on June 21. Finally, last week’s price break occurred on July 17 when gold prices breached the lows achieved in December of last year at $1,238 per ounce.

Add to this a major technical event, when on June 22 the short-term 50-day moving average crossed below the long-term 200-day moving average for the first time since November 17, 2016. The “death cross” which occurred in 2016 happened just after the presidential election. This was a point in time in which gold traded to a high of $1,338 on November 9 and to a low of $1,123 on December 14 of the same year.

Typically, traders see volume diminish across multiple markets and begin to pick up in September as summer comes to an end. Although interest in gold trading has been relatively steady throughout the year, pricing continues to be pressured by a surging U.S. dollar and selling pressure.

What is unique about trading activity this summer is the fact that gold has not been acting as a safe-haven asset which has traditionally been the case. The current trade dispute, which has a real possibility of becoming a trade war, has not moved the needle in terms of gold pricing. Traders continue to focus upon rising U.S. equities and the risk-on market sentiment that has been so prevalent over the last couple of years.

It seems, regardless of geopolitical hotspots which have emerged or trade tensions which have been developing, as far as gold traders are concerned there ain’t no cure for the summertime blues.

Wishing you as always, good trading,