Traditionally, summer months are weak for precious metals and the exchange traded funds (ETFs) that track them, but why might this summer be different?

Przemyslaw Radomski of Sunsine Profits, in an article appearing on Minyanville, gives the following reasons why gold and silver may be scorching this summer:

  • The demand for gold is potent, indicated by strong buying pressure.  This is being brought on because of weakness in the U.S. dollar.  Additionally, when analyzing the SPDR Gold Trust (GLD), the relative strength index and stochastic indicators both suggest that higher prices are likely to occur.  GLD is up 5.4% year-to-date and is trading above its 200-day moving average.

  • Trading volume doesn’t indicate that gold is necessarily bullish, however, it doesn’t confirm that gold isn’t bullish, either. In other words, don’t count it out yet.
  • Based on stochastic indicators, it appears that silver has bottomed out and the support level on high volume has been touched, therefore the most probable direction for silver is up.  The iShares Silver Trust (SLV) is up 19.6% year-to-date and is trading above its 200-day moving average.

Regardless of your take on precious metals and whether or not you agree with Radomski, you should always watch the trend lines, do your homework, stay diversified and stick to your strategy when playing the precious metals market.

For more stories on precious metals, visit our precious metals category.

For full disclosure, some of Tom Lydon’s clients own shares of GLD and SLV.

Kevin Grewal contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.