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Gold is Rallying, is Silver Next? | The Mesh Report

Gold is Rallying, is Silver Next?

The Gold Enthusiast June 26, 2020 Comments Off on Gold is Rallying, is Silver Next?

It’s been a weak start to the month of June for silver (SLV) as the metal is lagging gold by 600 basis points, down just over 5% thus far. This continued underperformance is likely what has contributed to the skimpy demand for the metal among small speculators, with long exposure from this group remaining near 9-month lows.

However, while silver has been underperforming over the short-term, the metal looks like it might be changing its character over the medium-term, as the silver to gold (GLD) ratio has been in a clear uptrend since the mid-March lows.

If true, this is a significant development for the bulls in the metals space, as both gold and silver tend to perform much better when silver is leading. Let’s take a closer look below:

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(Source: StockCharts.com)

As we can see from the chart above, showing the silver/gold ratio, silver has made a significant comeback from its worst performance against gold in over a decade, briefly trying to reclaim its key weekly moving average.

Generally, two or more weekly closes above this key moving average have signaled a positive change in trend in the silver/gold ratio, and this has favored silver over the medium-term but has also produced outsized returns for gold.

While silver has yet to reclaim this critical moving average (yellow line), it does look like this ratio is building a new base, and gold’s recent move to new highs is not dislodging this indicator yet.

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