Silver Outshines Gold

Silver looks to continue to outperform gold in the short-term.

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.

Source: Tradingview, City Index

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.

Source: Tradingview, City Index

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.

Source: Tradingview, City Index

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. 


Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.