(Kitco Commentary) - Last I wrote, the morning of May 31, I suggested caution was merited in the metals. I cited the gold-silver ratio at critical support, and the probability of its reversal upward, as the main signal to be respected.
The below weekly chart with the black arrow demarcating the week of May 31 (candle wick formed that Friday afternoon) shows the ratio did turn up and is now approaching overhead resistance.
I suggested some downside targets for gold and silver as well. Silver indeed fell, trading as low as $26.50 last week, from its high of $31.75 on May 31. That said, silver may be finding support right now (weekly chart below), as the gold/silver ratio starts to look toppy. Although the gold/silver ratio does seem to have a small amount of room to move higher, the probability is that silver turns up at its support, as the ratio turns down at its resistance, despite any volatility from here.
Although gold too has dipped since my last writing, it has shown remarkable strength, keeping a series of higher lows intact to form what seems to be a rising wedge as shown on the daily chart below.
The rising wedge pattern is not particularly bullish, and the opportunity for a trade here may be to sell some gold to buy silver. That does not mean I think gold is going down; in fact an upside break of that rising wedge would be very bullish if not immediately reversed. I do think the opportunity exists, or is quickly approaching, for metals bulls to adjust positions in favor of silver while the market offers value in the swap.
Thanks, and good luck.
