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Quiet summer markets may offer one of the best opportunities to steadily accumulate gold and silver. China imported 692 tonnes of gold during the first five months of the year, a 76% increase over last year. Meanwhile, Samsung shares are taking a hit as momentum in the semiconductor sector begins to fade. With strong-handed buyers continuing to pile into gold, much of that supply may not return to the market anytime soon.
- China Imports 692 Tonnes of Gold in Five Months, Up 76% Year Over Year
- Samsung Stock Gets Whacked as Semiconductors Lose Steam
- Strong Hands Accumulating Gold Are Unlikely to Sell Anytime Soon
“I think we quickly forget the structural changes taking place in the gold market. We can lose track of them and be blinded by short-term price action. Indifference to these major structural changes, it’s going to be costly for policymakers and it’s going to be a lost opportunity for Western investors.” —David McAlvany
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Kevin: Welcome to the McAlvany Weekly Commentary. I’m Kevin Orrick, along with David McAlvany.
David, my wife reminds me often. She says, “Kev, it’s summertime. Don’t you remember? You’ve done this now almost 40 years. You should be able to quiet down because your clients have.” So I think there are times when you have to back away and go, “You know, I don’t know that we always have to be looking for the next newest thing.” And summer is a good time to not do that.
David: Summer is typically a quieter season in financial markets, not because there’s less happening in the world, but because investors are paying attention to other things. School, families, travel, routines change and vacations replace the trading desks, if you’re talking about Wall Street. So pull up a volume chart on almost any major index and you’ll see it. Participation fades as summer progresses.
Kevin: You know what’s interesting, though, you asked me this last night when we were talking. You said, “Kevin, when has been the best time to buy precious metals?” And thinking back, it’s like, you’re right, June and July, I guess after 40 repetitions, we should probably start learning the patterns. This is really a great time because it is quiet.
David: The same seasonal pattern generally applies to precious metals. There’ve been a few notable exceptions since 2015, if you want to stretch back through that 30 or 40 years. But over the last 30 or 40 years, gold and silver have often drifted through the summer in a period of relative indifference. Markets simply lose mind share to other things.
Kevin: Well, yeah, to going out into the pool, maybe swimming in the ocean. What do you think?
David: Absolutely. The neighbors are coming over. The grandchildren arrive next week. We’ll look at the portfolio after vacation. Those are things that press other things to the periphery. And if you’re in Europe, perhaps after vacation, it’s not next week, it’s next month. August is effectively a national holiday across much of the continent. My colleagues and I long ago learned not to schedule business trips to Paris or Brussels or Hamburg in August. Many of the decision makers simply aren’t there.
Kevin: Well, and especially in the precious metals markets because these guys go on six-week holiday, it seems, the last part of—well, August to early September, but quiet can change.
David: It’s quiet until it isn’t. And when traders return, volume increases, reactions to headlines become more pronounced, and markets begin to move—and it’s not always higher.
Kevin: I think about the stock market. It usually gets quiet in the summertime. And then when the fireworks start, it usually is early fall or mid-fall.
David: When you have major equity market corrections, and that doesn’t happen that often, but off of all time highs, when you have a rollover or a top being put in, it’s very common. It’s very common that it happens in the fall, and the summer that preceded it was an increase in price on low volume. So historically, some of the largest equity corrections have emerged after low summer volume rallies, and prices continue climbing while participation steadily declines.
That leaves markets vulnerable once liquidity returns in the fall, or I should say once participants return and liquidity evaporates. So that pattern has preceded not only the routine 10 to 20% corrections, but several of the major bear markets of the last century.
Kevin: It was something that you brought up that when you have these all-time highs, but it’s on lower volume, that can sometimes be a signal.
David: Current scorecard looks something like this. You’ve got the Dow Industrials that have pushed to another all time high, but on declining volume. Meanwhile, the Dow transports have yet to confirm with a new high. That leaves a classic Dow theory non-confirmation in place. You generally want to see both of those moving at the same time or confirming each other in the price action. One has moved, the other has not.
Breadth, however, has broadened considerably. In recent months, we’ve talked about how there was such concentration in just a few names, and we’ve begun to see that spread out a bit, which is healthy. So cap weighted, S&P 500 reached new highs in early June. You’ve got the equal weighted S&P, which broke to fresh highs on July 2nd. Mid-cap stocks reached new highs on June 30th, both the S&P small cap 600 and the Russell 2000.
Again, these are your smaller-share indices, followed with new to all-time highs on July 1st. And you look at Barron’s. According to Barron’s, small caps just completed their strongest first half in 35 years.
Kevin: Well, and that’s not [unclear]. I love the fact that you’re talking about breadth increasing for at least the short term. That’s quite a bit healthier than having everything in the Mag 7.
David: Right. You’ve also got the value line index, posted a new all time high on July 2nd. So a lot of things happening there in the early part of the month. NASDAQ, NASDAQ-100, they peaked in early June and have largely moved sideways since then. Sector leadership is becoming more nuanced. You’ve got consumer staples. They peaked back in February. Consumer discretionary stocks, they topped in May. An indication that parts of the consumer economy may already be weakening.
Healthcare recently registered new highs, financials are approaching new highs. Maybe most encouraging is the S&P 500 advance-decline line, which also reached a new all-time high on July 2nd. Again, that’s a measure of breadth, an important statistic because breadth almost always peaks before or alongside major market tops. So over the last month, anticipation has improved as leadership broadened beyond the Mag 7. Capital has rotated to a wider range of stocks.
It’s a healthier market structure than one driven by only a handful of mega cap technology names.
Kevin: So could that be a signal that the market could go higher? I mean, does breadth tell us the direction of a market?
David: I think what I would say is that we should look for the advance-decline line. If it turns lower and prices are moving higher, then we’ve got a significant issue afoot. They both move together, you’ve got something of a confirmation that higher prices are going to materialize. If the prices move higher, but the advance-decline line doesn’t, that would be a telltale that this is a market top. For now, that remains constructive, but it’s something to monitor closely.
Again, should the advance-decline line begin making lower levels or lower highs while the major averages continue climbing, history suggests the market is approaching a more meaningful top.
Kevin: What we’ve seen in the past is that bubbles have a tendency to move. So you can be in the AI sector for a while, and then it moves to semiconductors. So why don’t we look at how that bubble is moving right now?
David: Yeah. Well, the big story, the narrative has been AI. Whereas they ran, the question was what’s going to feed the beast? And you’ve got to have the equipment, you’ve got to have the semiconductors. And the semiconductors were getting squeezed in terms of supply with what was viewed as infinite demand coming from AI. They could charge whatever they wanted. So semiconductors, they inherited the momentum leadership from the Mag 7 and the AI names. The question now becomes whether expectations have become impossible to satisfy.
Kevin: Well, and aren’t we seeing that this week with Samsung?
David: Yeah. Samsung Electronics provided a reminder this week. The company projected roughly an 1800% increase in profits. Again, if you’re selling the data centers, you’ve got the chips, 1800% increase in profits. And yet on the announcement the shares fell 7%, dragging down much of the South Korean market. And so that’s what happens when expectations outrun fundamentals.
Kevin: And this goes away from value investing and more toward momentum investing. You’ve talked about the differences in the past. So when you have momentum going into a market, everybody is making money. But when you have momentum shifting and coming back out, it can go away real quick.
David: When momentum finally reverses, you get today’s eager buyers, they become tomorrow’s desperate sellers. So 7% declines have a habit of becoming much larger when positioning has been crowded, and it has been crowded. So does 50 to 75% declines sound like an extreme call at this point? You look at Micron, you look at Western Digital, you look at Sandisk, and you have to wonder if those charts are telling you it’s over already. In a period of 10 days, you are 25 to 35% off the all-time highs.
And again, you roll the clock back two weeks ago, and if you’d said, “Hey, we could see a 35% decline in these names,” you would’ve been laughed at. And yet in the 10-day period, that much is gone. You duplicate that kind of decline over the next 10 days, you’re 50% in less than a month. And that happens with highly cyclical stocks.
Kevin: So let’s move to the precious metals because I had made the comment, if I was just smart over the last 39 or 40 years, I would put most of the money that I put into the precious metals throughout the year, I would do it right about this time. And you had mentioned the 65-week moving average last week. Let’s talk about that because the precious metals may be, could they be finding a floor right now?
David: Last week, precious metals quietly found their footing. Gold stabilized just above its 65-week moving average after briefly trading below 4,000 an ounce. Silver likewise held support between 57, $58. It remained above its own 65-week moving average. Among the precious metals miners, the HUI, the Gold Bugs Index successfully tested its 65-week moving average, held above it, while the XAU, another miners index, actually never reached that level during the correction. It held above the 65-week without testing it.
Technically, a weekly close above 4,150 in gold and—call it 63 bucks, within a dime’s throw of that—would provide encouraging evidence that the correction has ended.
Kevin: Okay. So we’re talking about the correction ending. How about the resumption of the bull market? Are there some technical numbers that you’re looking for?
David: A weekly close over the 50-day moving average—a weekly close, which this week would be roughly 4,400 and next week 4365—would be considerably more significant, suggesting that the primary bull market has resumed, setting the stage for a retest of the January highs before year-end. So Michael Oliver, a previous guest of the Commentary, looks for that cross of the 50-day moving average this week or next as the all clear signal.
Kevin: Okay. So seasonality is truly in play at this point. Dave, you mentioned the Indian wedding season. That comes up, what is that? Is that in September?
David: Yeah, August, September, you’ve got harvest and in an agrarian, largely agrarian culture with the largest population on the planet, with a cultural predilection to own gold, it matters that we come into what’s affectionately known as the love trade. So additional weakness can’t be ruled out, but seasonally, time is beginning to favor the metals. We’re running out of calendar for the traditional summer lull.
And historically, if you’re looking at the strongest months of the year in terms of performance, just one month performance, January is a strong month. August, September, November, those are strong months. August and September are usually the strongest months of the year. Three of those four months remain ahead of us.
Kevin: Which means that you want to buy in the weak months. You’re telling us the strong months, but if you’re looking to add to positions, June and July really have been a very, very good time to do that.
David: Absolutely.
Kevin: So if deploying fresh capital, where would you go right now?
David: I think as investors return from vacation over the coming weeks, where are they likely to deploy fresh capital? They’re probably going to put it into what has been working. So momentum investors naturally gravitate towards stocks that have made new highs. They believe that they’re going to make new highs again. Today, that’s largely in the AI space. The challenge, Kevin, I think is that hedge funds are already there. I think you look at those charts, momentum may be breaking down, not continuing up.
So AI-related positions amongst hedge funds now represent just shy of 10% of all hedge fund assets. It’s one of the highest concentrations on record. So when momentum finally shifts, retail investors won’t simply be selling into an empty market. They’ll be competing with professional money managers trying to exit the same crowded positions. In some respects, it reminds me of the old campfire joke about outrunning a bear. You don’t have to outrun the bear, you just have to outrun the next person.
Hedge funds are wearing track shoes. Retail investors are wearing flip-flops. When everyone heads to the exits, I think we know who’s going to get eaten by the bear.
Kevin: So can you make a prediction as to when the volatility will return? It’s kind of quiet right now.
David: Yeah, I don’t know precisely when volatility returns, but given the current concentration in both AI equities—and going back to the hedge funds for a minute, their huge concentration in Treasury positions. I suspect that the eventual move in volatility will be larger than most investors expect. And so, are we starting that now? Do we have to wait until the end of August? It remains to be seen. But if I were looking for the next major rotation, personally I’d be reducing exposure to crowded AI trades while liquidity is still plentiful, and quietly accumulating precious metals and mining shares while competition remains remarkably limited.
Kevin: So you would say, again, you’re tending towards value investing, moving away from the momentum trade while things are fairly quiet, and going back into the value side.
David: I can’t help myself. There is a value investor deep inside me, and I like things when they’re cheap and I really don’t like chasing things when they’re expensive. Momentum investors by contrast will likely require— If you’re thinking about the metals, they’re going to require some price confirmation first. So should gold begin strengthening into its favorable August seasonal window, that price action could attract an entirely new wave of momentum capital into the precious metals complex.
Kevin: Dave, I try to share with clients, and yesterday was another example. When they’re buying gold, I try to move them away from looking at price because, to be honest with you, over the last four decades working with the family and working in gold, the reason I get up in the morning really isn’t price action at all. The reason I get up in the morning is because there’s a preservation aspect to gold that just overpowers everything else. And I think the central banks right now are seeing that. They’re not really watching the price, are they? I mean, is China watching the price before they make their next transaction?
David: Well, I mean, they’ve been buying consistently for the last 20 months in a row. So to some degree, if you look at the volume of purchases, it tends to increase with lower prices, but they’ve been consistent buyers. And I don’t think that they’re afraid of either marginally higher—and certainly it’s more attractive if they’re adding with lower—prices. But I don’t think that’s their primary motivation. I mean, seasonality is a part of the picture for retail investors.
I think the underlying demand story for gold, it continues to improve. Central banks are obviously a part of that. Purchases in the month of May, which is the most recently updated statistics, 41 tons of gold in May, another solid month of official sector buying. More impressive, however, were China’s import figures. And so obviously, we capture some of the central bank buying—10 tons by the Chinese central bank. But China’s total imports for the month, 163 tons of gold during May alone. That brings total imports for the first five months of 2026 to 692 tons. That is a remarkable 76% increase from a year earlier.
Kevin: How does that factor into global production every year? What percentage is that?
David: It’s between 3,000 and 3,500 tons of mine supply each year that gets fed into the market. So you look at the 692 tons that were imported by China in the first five months, you’re talking somewhere between 19 and 23% of annual global mine production absorbed by one country in five months. It’s more than 22 million ounces quietly migrated from weak hands to strong hands.
Kevin: So this goes back to the momentum side of things. The momentum investor is missing that completely.
David: Right. Western momentum traders have largely reduced their exposure to gold during the correction. They were buying starting at the mid-year last year, 2025, got very interested as the price action was supportive through January of this year. And if you look at COT statistics, commitment of traders reports, and sentiment statistics, daily sentiment index for gold, and many other measures that would suggest they’re gone. The hot money has left. They’re not interested.
So again, the Western momentum trader, they’re out on this correction. Meanwhile, you’ve got the long-term Chinese buyers that have been accumulating those same ounces at lower prices. That transfer of ownership matters. And when we say it’s gone from weak hands to strong hands, these are strong hands that are pretty sticky. They own it, they have it. And I don’t know what price they’re willing to let go of it, but it’s nowhere between here and probably eight or $10,000 an ounce.
Kevin: And they’re not likely to sell based on a profit. David, I’ll never forget April 12th, 2013. It was the one day I said, “Okay, let’s go fish at Lake Powell.” The head trader and I and a couple of other guys, we were out of the office, and sure enough, there was a bear raid. Merrill Lynch and Goldman Sachs had sold 400 tons, a naked short into the market on a Friday, April 12th. It caused the market to go way down, the gold market. And then Monday it went down further. And what we didn’t know was there was a transfer of wealth going on at close to the bottom of the market.
David: Right. Well, you go back to 2013, 2014 when the market was breaking down. The ultimate lows were December 2015. But that period, 2013 and 2014, the movement of ETF ounces, so Western liquidations, those gold bars moved to Switzerland for refining to kilo bars, and then final delivery to Shanghai and Hong Kong. Ounces that are today not available. So one major difference between then and now, yes, we still see the migration of ounces from West to East.
But one major difference between then and now is the increased appetite for gold in China for very different purposes, for net trade settlement purposes. As more global trade is invoiced in Chinese currency terms, gold is a neutral trade settlement mechanism, has a huge new source of demand. You can see this driven in large part by the migration of trade invoicing. The Chinese are wanting to be paid in their own currency.
Trade in Chinese currency, according to the Wall Street Journal, has increased fourfold over the last three years. It now is at 8% of global trade being invoiced in RMB. The US Treasury Department. If you just look at this major shift that these structural dynamics— A part of this has to do with central banks wanting to hold a stable reserve.
That’s what we saw in 2022 when Russia invaded Ukraine, US Treasury weaponized the dollar, and all of a sudden reserve asset managers said, “We can’t just sit in Treasuries. We can’t be in the above-ground financial universe where the Treasury can target and take what they want.” Instead, when the US Treasury Department chose to weaponize the dollar, the world responded and has responded by making the dollar decreasingly relevant.
The dollar is a threat, and gold is increasingly the market’s expression of preference in a new order for trade and reserve management, both. But that trade feature is really, I think, significant as you look at the ramp-up for gold demand, not only in Asia, but amongst the trading partners with China in particular.
Western investors are not going to appreciate these structural changes until gold is marching towards 10,000 an ounce. And then, I think you’ll see the preference for a new monetary regime is obvious and reported by CNBC, discussed by Bloomberg, and the new market reality for the metals.
Kevin: Well, and it strikes me that even I and you, our entire adult lifetime, what we’ve been doing when we buy gold is we’ve been hedging against the devaluation of what is the complete reserve currency of the world. I mean, the dollar was a 100% reserve currency as far as at least oil was concerned. Even guys like us, Dave, are going to have to start thinking differently because we’re not just hedging a world reserve currency and the inflation that comes, but we’re actually preparing for a major structural change, something we haven’t actually experienced in our lifetime. It’s a monetary structural change.
David: Yeah, the petrodollar recycling certainly reinforced the dollar’s role as a reserve currency. And this is different in this particular chapter where we’re talking trade invoicing and the option of using a different currency—manufacturer to the world, their currency. And to avoid volatility or changes in the controlled nature of their currency system, with capital control still very much in place, net settlement in ounces is an elegant solution.
So I think we quickly forget the structural changes taking place in the gold market. We can lose track of them and be blinded by short-term price action. Indifference to these major structural changes, it’s going to be costly for policymakers, and it’s going to be a lost opportunity for Western investors. Those who are seeing the opportunity now, Asian investors, they seem, according to the import numbers, to be paying attention, very much paying attention.
Kevin: So as we wrap up, Dave, I know you’re trying to relax with the family. I asked you if you’re getting much relaxation time in, but between relaxation time for the person who’s watching this show, what would you encourage?
David: Well, I mean, as summer reaches its end, equity market speculators realize they are too concentrated in themes that are now sputtering. Precious metals may again capture mind share again as they did in late 2025. Until then, pay attention to the markets, but enjoy the pool, enjoy the beach, enjoy the family, the grandkids, buckle up for a very volatile second half of the year.
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You’ve been listening to the McAlvany Weekly Commentary. I’m Kevin Orrick, along with David McAlvany. You can find us at McAlvany.com and you can call us at 800-525-9556.
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This has been the McAlvany Weekly Commentary. The views expressed should not be considered to be a solicitation or a recommendation for your investment portfolio. You should consult a professional financial advisor to assess your suitability for risk and investment. Join us again next week for a new edition of the McAlvany Weekly Commentary.
