The summer minimum

Demand for gold for jewelry tends to ease during summer. Jewelry producers and  mints allow for their staff to take a summer break. Unless there is any other pent up demand, gold prices are usually weaker during summer.

The Corona year 2020 was the big exception, with a precipitous price drop in March at the outbreak and a subsequent summer rally after massive government support for businesses and employees on both sides of the Atlantic.

So far $2000/Oz gold never held very long. The Ukraine war and supply chain disruptions caused higher energy and transportation costs and higher food prices. Inflation broadened over all products and services. Persistent deficits in public finances make it unlikely for inflation to settle onto a more benign level. Only a severe recession can destroy demand and eventually cause a short deflationary shock.

Rising summer minima

It almost reminds climate change headlines. But I am referring to the gold price fluctuations in July and August.

2020 was an atypical year because of the global Corona outbreak in March. On March 17, gold plunged to $1472.4/Oz (London AM Fix). The subsequent rally brought gold to a new all time high at 2063.2 (Comex close) and $2067.15 (London PM Fix on Aug 6). We exceptionally had a summer maximum in 2020. Over 2020 gold would average $1767 (London Fix), while over the summer months gold averaged $1903.5

In 2021 the speculative surge of summer 2020 was forgotten. Following maxima and minima are equally on a Comex close basis (not intraday spikes or swoons).

In July and August 2021 gold kept below $1830 and bottomed at $1728.8/Oz. The summer average was down to $1795. Over the year 2021 gold averaged $1799 (London fix). Gold did not break above $2000/Oz during 2021. 

The Russian invasion into Ukraine and the outbreak of a lengthy devastating war only caused a short rally of precious metals. The London PM fix on March 8 brought gold to its 2022 maximum at $2039/Oz. Despite rising inflation, gold prices could not hold on to their gains. The FED had  rapidly scaled down its QE and accelerated its pace of rate increases. This policy change did not leave gold unaffected:

In July and August 2022 gold kept below $1813 and bottomed at $1696.4/Oz. The summer average was down to  $1751. Over the year 2022 the average London fix for gold was $1801, nearly unchanged from 2021. The gold price trends down approaching September, a pattern which is not observed in 2021 nor 2023. 

During the first half of 2023, the FED kept raising interest rates, albeit at a more moderate pace. Rapid rate increases had already caused havoc among some smaller and mid-sized banks in the US. Silicon Valley Bank was the first victim. Banks not raising interest rates on savings accounts (or reluctantly and disproportionally little) made savers withdraw money. The counterintuitive stock market rally (against the backdrop of a looming recession) has been one of the results. But also metal prices remain firmer.

In July and August 2023 gold kept below $1977.7 and bottomed at $1889/Oz on Aug 17.  During summer 2023 gold averaged $1932. The running average of the London fix in 2023 is $1934.5, which is up significantly from last year. This also eclipses the level of 2020. We have seen a lower gold price volatility so far. Gold bottomed at $1811 year-to-date (on Feb 24) and peaked at $2050 on May 4.

It won't require much of an autumn rally for gold to break above $2000/Oz again. This time gold may just hold above the psychological round number. Will we end 2023 with gold at $2023/Oz ?

Graph of the gold price during three consecutive summers 2020 (orange), 2021 (green), 2022 (brown) and 2023 (blue) - All data are Comex closing prices in USD/Oz