Those Lazy, Hazy, Crazy Days of Summer

Friday, 11 July 2014
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Published in Gold Investing
Those Lazy, Hazy, Crazy Days of Summer PhotoDune.
There she goes again, surprising the daylights out of investors and market watchers, dashing expectations for another sleepy summer trading season! The scorned orphan of the financial community ratcheted up to yesterday’s London fix of $1,322.50 per ounce, and became its own hard act to follow at today’s London fix of $1,343.25. As I write, gold is now hovering at $1,337.00 per ounce. You go, Gold!

Positive-Pullback

Aren't the summer months traditionally the most sluggish period for the yellow metal — and, in fact, for the entire precious metals complex? Europe’s traders like their vacations. For that matter, so do Asian and US traders. Isn’t this the time they pack it in until September? What in Sam Hill is going on here?

The answer to the question can be had in three short words – the Middle East. Don’t underestimate what’s going on there; and don’t tell yourself it’s all about the same old, same old conflict between Israel and Palestine. This one’s big. Hamas is ramping up its weaponry; and Israel’s Premier Benjamin Netanyahu has said that he could care less about international pressure for Israel to ease up.

Palestinian President Mahmoud Abbas has declared that Israel is only “hours away” from a ground invasion. In no hurry to dispute the truth of Abbas’s remark, Israeli leaders have implied that he’s correct, and have called up 20,000 reservists for battle. Netanyahu said that Israel has bombed more than 1,000 targets and still has more to go.

Add to this the Iraqi conflict, and the possibility of spillover into a wider war against Israel waged by Syria, jihadists, and Allah knows who else — the effect of the entire debacle on the gold market is undeniable. With the price of oil at stake, the impact of Middle East affairs on the gold market can never be far behind. Investors and traders, wary of a boil-over in the equities markets, will instinctively move cash to gold for a safe haven.

From a technical perspective, gold is currently in a consolidating pattern. On the charts, this pattern shapes up in the form of a pennant. If the yellow metal achieves a conspicuous close in the $1,335-per-ounce neighborhood, we could be looking at sharp surge to the upside.
In the meantime, it’s official. "Those Lazy, Hazy, Crazy Days of Summer" was a popular tune sung by Nat King Cole in 1963. But it’s no longer an apt description of what happens to the gold market during July and August.

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Trevor Gerszt

Trevor Gerszt has been passionate about gold since childhood. Growing up in South Africa, the world’s second largest gold producer, Gerszt spent his youth collecting gold coins. Surrounded by a family of experienced coin collectors, he gained valuable insight about the precious metal.