Precious metals, is a new sell off approaching?


Do we have to prepare for the usual ‘pit stop’ for gold and silver? The cavalcade of precious metals such as gold and silver has been really tumultuous in the last month, after the thump of March 16 for Coronavirus, a black day that Projections on the Stock Exchange also highlighted with concern.

Gold, since May 17, has risen by 17.5% from its low in March. And silver went up 45%. It wouldn’t be strange at all if the traditional June pit stop occurred. If we are in the best tradition of the bull markets (two steps forward and one step back) it would not be surprising to see a sign of weakness (to be seized in the coming weeks). To realize this, just scroll through the graphs of the average cumulative gains and losses of gold and silver over the year. As well as the average of price movements since 1975.

A useful window to buy

Late June and early July are, on average, the only times of the year when there are price reductions. Just behind the traditional US vacation weeks. So a new sell off is approaching for precious metals? The signal caused by the seasonality of the raw materials, however, may be less recurring this time, in an extraordinary year such as 2020. In the last 45 years the seasonal model on gold has come true at 75%, therefore care must be taken. In fact, this year Chile, where 75% of the gold is extracted (the remaining 25% comes from Argentina) seems more interested in launching support programs for the extraction of the so-called “white gold”, lithium.

Will a bearish cycle trigger?

Despite this news and that gold products from the recycling of precious metal are increasing, sector operators are not convinced that the July test can trigger a sell off for precious metals and the start of a bearish cycle. In particular on gold, which today amounts to USD 1732.40 per ounce. Here is a video debate on the Nasdaq website.

For history lovers, there have been 6 major bearish cycles on gold since 1971. That is, since the American President Richard Nixon dropped the greenback from gold, leaving the metal free to float on the market, while before the price of the gold was set by decree.

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