Silver Price Now Ready To Pare The Gold/Silver Ratio

May 22, 2018

London (May 22)  Gold (GLD) actually made a lower low Monday which means we could not confirm a daily swing low. I was following the yellow metal before equity markets opened and it had actually traded down to close to the $1,280 mark. However, a couple of hours before equity markets opened in New York, gold powered forward from that point and really rallied for the rest of the trading day. As I write, the yellow metal has made it past $1,292 an ounce, meaning it is over $10 an ounce from the lows of the day.

I think this is significant and means that we probably have an intermediate cycle bottom printed in gold. Why? Well, as the 5-day chart illustrates below, gold has very little to do this week to print a daily swing. Furthermore, when you study gold's recent intermediate cycles, there is a strong chance that today marked the bottom. Rallies out of intermediate bottoms are usually violent in nature. Furthermore, both silver (SLV) and the miners (GDX) also rallied Monday on the back of gold's u-turn. It was actually strange this time around that both silver and the mining complex actually bottomed before gold. Either way, this complex looks bullish now with all three segments looking to return to rally mode.

If we look at the silver long-term weekly chart, for example, we can see that we more than likely bottomed on the 1st of May which turns out will probably be 20 days earlier than gold. This is not normal but silver, as stated in a previous article, has vastly underperformed its bigger sister in recent times. The gold:silver ratio is way above average as we haven't seen those big moves we are accustomed to seeing in silver. In fact, silver has been stuck in a tight trading range for the best part of 18 months and has consistently printed lower highs. The bears have had a field day about this. However, if as I suspect, we have seen the lows today, the white metal's intermediate lows have been consistently higher over the past 12 months. Something has to give soon.


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