Gold and Silver: A “Diverging” Perspective on a Year-Long Setup
Here’s when the price paths of gold and silver started to go their separate ways
by Bob Stokes
Updated: June 17, 2020
Earlier in these pages, we noted a divergence in the price charts of gold and silver and quoted our April 27 U.S. Short Term Update:
Gold is massively overvalued relative to physical commodities and the ratio of gold-to-silver recently jumped to a record high. There remains a large non-confirmation between gold and silver.
A non-confirmation occurs when one market makes a new high (or low), but a related market does not.
Well, here's an update: That non-confirmation between gold and silver has now stretched to a year.
Our June 12 U.S. Short Term Update showed this chart and said:
Gold rallied above its July 2016 on June 20, 2019, which is when the paths of the precious metals started to diverge. The divergence at the 2011 peaks was nearly five-months long, with silver topping on April 25, 2011 and gold topping on September 6, 2011. An 8-month divergence existed at the 1987 top in gold and silver: Silver topped in April 1987 and gold topped in December 1987.
So, as the chart indicates, the present non-confirmation is indeed "long."
As Elliott Wave International's analysts have noted many times, such divergences between related markets are usually signs of trouble ahead.
Yet, as the Wall Street Journal noted on May 19:
Soaring Silver Attracts Investors
And, on June 11, CNBC said:
Gold gains on fresh virus wave fears, gloomy Fed outlook
However, EWI's analysts prefer to make an assessment of a financial market by looking not at the news, but at its individual technical picture.
Yes, it's possible that the non-confirmation between gold and silver will continue.
On the other hand, that non-confirmation -- along with gold and silver's Elliott wave structures -- are sending an urgent message that investors need to know.
Get the all-important details in our flagship investor package without any obligation for 30 days.
Follow the link below and you're on your way to getting those valuable specifics.
Elliott Waves Help You to Anticipate Trend Turns
Anyone can spot the current trend in a financial market.
Indeed, most investors assume that today's trend will carry into tomorrow. That's why they're caught off guard when the trend turns.
How do you avoid extrapolating the current trend into the future? Identifying the Elliott wave count helps avoid that error.
The Wave Principle's basic pattern includes five waves in the direction of the larger trend, followed by three corrective waves.
Thus, when a trend has unfolded in fives waves, you know to prepare for a turn.
Learn about the key financial markets that appear on the cusp of major trend changes.
Follow the link below for your risk-free trial to our flagship investor package.
Forget the Fed -- Watch the Waves
The Federal Reserve, and to a lesser degree the European Central Bank, have dominated the conversation about interest rates lately. But watch our Interest Rates Pro Service analyst Ivo Zhelev apply textbook Elliott waves to forecast the price of the UK's Long Gilt -- and, by extension, UK interest rates -- without a single glance at central bank statements.
Why a U.S. Recession May Foil Economists’ Expectations
A recent survey reveals positive expectations for the economy by a group of "professional forecasters." Learn why you may not want to bet the farm on that expectation. This chart compares leading economic indicators around the time of past recessions with what's going on now.
Gold Mining Stocks Lead Gold Lower: What’s “Fundamentals” Got to Do with It?
In mid-April, gold mining stocks led by VANECK GOLD MINERS ETF turned down from one-year highs to 3-month lows in May. Gold followed, reversing from all-time highs on May 4 to multi-month lows on May 25. We don't need another "fundamental" explanation for why.