From the Desk of Ian Culley @IanCulley
The US dollar is approaching a slippery slope.
And few markets embrace a falling dollar quite like precious metals.
Yet gold’s response to a weakening dollar so far has been subdued, perhaps due to elevated real yields.
But gold’s crazy cousin, silver, has enjoyed quite the boost…
Here’s silver reclaiming a critical seven-month polarity zone:
While gold rose 1.6% last week, silver ripped more than 8% – hence the “crazy” descriptor.
Silver’s explosive gains highlight a crucial takeaway aside from its high-beta status: investor willingness to accept greater risk in precious metals.
Notice gold futures and the silver-to-gold ratio tend to track one another:
Silver outperforming gold represents a healthy risk-on development that supports higher gold prices.
The silver-to-gold ratio led off the bottom last fall… and gold followed, climbing 28% to its May high.
On the flip side, the ratio failed to post a higher high this spring as gold retested an area of overhead supply (and all-time highs).
The silver-to-gold ratio’s bearish divergence provided a warning of the near-term top in the yellow metal.
After months of correcting sideways, buyers are returning to these shiny rocks.
Silver is catching a strong relative bid.
Our Gold Miners ETF $GDX trade is working.
And more mining names are near striking distance of our breakout levels.
Check out Eldorado Gold $EGO:
EGO is a $2B Canadian gold miner poised to break out from a multi-year reversal pattern.
I like buying strength on a decisive close above 12.25 with an initial target of 16.50, roughly at the 2017 highs, and a secondary target back toward the 2016 highs around 24.
EGO isn’t the only name at work right now – be sure to check out the Gold Rush Weekly Chartbook.
I imagine it’s only a matter of time before gold runs it back to its former all-time highs if silver continues to outperform and EGO and other mining names flash buy signals.
Stay tuned!
Click here to watch this week’s Gold Rush Video:
Let us know what you think. We love hearing from you.
Thanks for reading.
And be sure to download this week’s Precious Metals Report below!
Allstarcharts Team
