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Silver Analyst
Posted Jan 27, 2016
It’s time to check on how the venerable gold-silver ratio is doing since
we last spoke on it. A look at the monthly OHLC price over the last twenty
years is shown below with its 20-month moving average as well as the line
chart of silver.
As you can see, the formula for the last fifteen years is almost robotic.
When the ratio hits around 80 and drops below its 20-month moving average, a
silver (and gold) bull market is upon us. When the ratio stays above the
20-month moving average, a silver bear market persists.
(Click on image to enlarge)
The ratio hit 79.9 back in August 2015 and ever since a line of resistance
has ensued as the ratio drew back to the 20-month moving average, failed to
drop below it and then went back up to retest the 80 level.
This time of retrenchment is somewhat of a frustration as gold and silver
inch lower in proportion (hence the tight range of the ratio) with no
resolution either way in terms of a climatic drop or a heraldic surge
announcing the new precious metals bull market which shall suitably distract
us into the next decade.
Nevertheless, this long line of resistance shown in the chart is something
of an encouragement as a breakout would be bearish for silver. Having thus
far tested the line again this month at 79.26, it is our anticipation that it
will again drop back towards the moving average somewhere in the low 70s and
again raise the anticipation of a silver surge.
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