Will there be summer seasonal weakness for precious metals?

“Precious metals markets typically enter a period of seasonal weakness during the summer. Manufacturers, jewelers, and investors often reduce their buying of precious metals during these months, leading to some softening of prices. Often the price weakness maybe more subtle, in the form of a headwind to precious metals prices rising rather than an outright decline, at least not any meaningful decline.

Seasonal patterns are easily and often overridden by events, either in the markets themselves or more often in the economic, financial, and political environments that condition trends in fabrication demand and investment demand.

CPM expects seasonal demand patterns may becalm precious metals prices to some small extent this year, from June through August, but that the panoply of political issues confronting the United States and the world, along with slowing economic growth in most countries and fiscal policy constraints seem likely to create an environment in the final four months of 2024 and into 2025 in which investors sharply increase their demand for gold and silver as safer havens for their wealth and protection against these hostile political, social, and economic conditions, pushing the prices of both metals sharply higher. New record highs in gold seem assured in such an environment, and new record intraday and annual average silver prices also appear to be well within reach.

This expectation of CPM Group sets near-term precious metals price forecasts to move in a sideways fashion at elevated levels, at least in the case of gold and silver, rather than some sharp correction in prices. Platinum and palladium prices too are expected to move sideways, but their price levels cannot be referred to as elevated, especially compared to where they have been in recent years.

As can be seen in seasonality charts for all the four metals, there is a distinct seasonal pattern across these markets. Typically, there is price strength during the first five months of the year followed by a weakness in prices between June and August. Prices generally soften as industrial users, jewelers, and investors take vacations and reduce their demand. While the strength during the first five months and the pace of recovery during the last four months differs among the metals, the weakness during June through August is quite consistent across the metals. For this reason, it is quite likely that this seasonal weakness will play out this year as well. That said, it is likely to be less intense than what the seasonal charts may suggest. It is not unusual to have seasonal patterns overridden by events, by economic developments, political conditions, and fundamentals specific to individual markets.

This year could be one of those years when political and economic factors may override seasonality. As mentioned before, while seasonal weakness may not be completely eliminated it is expected to be less intense. There is a lot of political and economic uncertainty, which may keep investors interested in adding precious metals, especially gold and silver, to their portfolios as hedge against these risks.

While some price weakness is to be expected, CPM Group’s analysis suggests that investors are sufficiently concerned about future economic trends and a host of international political issues and domestic divisions in many countries around the world. Given these exogenous factors, CPM expects investors to continue to buy gold and silver and will take advantage of the current and any further dips over the next three months to add to their holdings. The mild price declines expected in the precious metals complex are not enough for longer term investors to liquidate long positions. It may be enough to warrant short-term hedges, but the expectation is that any weakness may be limited this year.”