First, the positive: Gold looks to be putting in a pattern of higher lows (5-hour timeframe shown below), although it is facing overhead resistance at about $5,100.00, which participants should be paying close attention to. Note that stochastics are overbought — longs want it to stay that way while price breaks above $5,100.00. Failure will likely mean another pullback, which bulls would want to see form another higher low.
Silver is doing something different, putting in lower lows after finding resistance in the congestion area at approximately $92.00. Silver has also moved into overbought territory on the same 5-hour timeframe, but unlike gold, it has failed to rise high enough to retest resistance in the process.
The gold-to-silver ratio shown below on the weekly timeframe looks like it has room to run higher, perhaps as high as 79–80, which would take it up to the 50-week average.
Conversely, the 50-week moving average in silver still sits far below the current price. Although the recent flush has done considerable work in bringing price closer to the mean and clearing out excessively bullish sentiment, it remains to be seen whether a bullish move is set to resume in the short or medium term. In this trader’s opinion, caution certainly remains warranted.
We will be looking to the end-of-week close for another hint as to what’s next, but even a daily close below $78.00 in the coming days would raise the caution level another notch, in this trader’s opinion.
