The chart below looks at the ratio between silver and gold over the past 30 years. Metals bulls historically receive a bullish message when this ratio moves higher. Back in 2011, the ratio hit highs that took place in the early 1980s and it's been downhill for gold and silver ever since. Is this long-term trend in metals be about to change?
The decline in the ratio has it testing the 20-year support line (1), which has held several times over the past 20 years.
Over the past couple of years, the ratio has tested the support line (1) at (2), which has held. While testing line (1), the ratio could be creating a bullish inverse head-and-shoulders pattern.
If the read of the inverse head-and-shoulders pattern is correct and falling resistance is broken to the upside at (3), the ratio could be sending a bullish message not often seen over the past 7 years.
What do metals bulls NOT want to see? Support line (1) fails to hold! If it does, the ratio will continue to send a concerning message to the precious metals markets.
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