If silver doesn’t come to play, precious metals won’t win the day.
Gold’s resilience has been impressive lately, especially as its two main headwinds – the US dollar and real yields – catch higher.
But while all eyes are following gold as it coils just below all-time highs, I’m tracking silver. Because gold’s doggedness is all for naught if silver breaks down.
Check out the iShares Silver Trust ETF $SLV retesting a critical former support level at approximately 20.50:
Perhaps it’s not the cleanest level.
Nevertheless, plenty of price memory exists at this shelf of former lows. If SLV undercuts those former lows, precious metals will fall under increased selling pressure.
Gold futures will break down below 2,000. The Gold Miners ETF $GDX will fade below 30. And the handful of breakouts we’ve witnessed over the past few months will fail.
Plus, the silver-to-gold ratio will likely post a fresh 52-week low:
It’s another breakdown gold bugs prefer to avoid.
Silver dropping relative to gold signals a low turnout as investors are being rewarded for owning the tamer asset. (That doesn’t sound like a party to me.)
The same line of reasoning applies to gold mining stocks versus the broader market which continues to register fresh lows.
It’s a stocks-over-rocks environment that’s not conducive to a rip-roaring rally in gold – or any precious metals.
And it will only get worse for gold bugs if silver breaks down.
