Tuesday, August 27, 2019 5:02 PM EDT
As my colleague Matt wrote last week, the gold/silver ratio currently favors silver. With negative yields around the world and the threat of the FOMC cutting rates again in September, precious metals have been in vogue as of late. Let’s take a look at some shorter-term action over the last couple of months.
Looking at gold, the yellow metal has been moving higher since the end of May and has slammed right up against horizonal resistance at 1588, dating back to April 2013. Gold currently is in a rising wedge with a divergent RSI. This formation makes it ripe for a possible pullback as far down as 1406. The target for a breakdown of a rising wedge is 100% of the wedge.
(Click on image to enlarge)
Source: Tradingview, FOREX.com
Where has silver been during the run-up in gold? Silver didn’t begin moving up in earnest until mid-July, at which point it began to outperform gold. Currently, silver is trading near 18.18, up over 3.0% on the day and up over 9% in the last 3 days! Silver is heading into trendline resistance and the RSI is in overbought conditions. Silver, like gold, also looks ready for a pullback with first support at the bottom trendline, near 17.75.
(Click on image to enlarge)
Source: Tradingview, FOREX.com
As silver began to outpace gold in July, the gold/sliver ratio began to roll over. The ratio put in a high near 93.45 and traded off into the end of July to 85.60. It then bounced 50% of the move from the mid-July high to the end of July low. The high on August 5th was 89.84. This set up an almost perfect AB=CD pattern, where the length of A to B should equal the length of C to D.
(Click on image to enlarge)
Source: Tradingview, FOREX.com
Although price never moves in a straight line, if that is the case here, it would suggest a target of 81.75 in the gold/silver ratio. This would mean continued out performance of silver over gold in the short-term.
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The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such ...
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Disclaimer:
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
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