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Gold/Silver Ratio Bounces Off Key Resistance

Published 08/31/2015, 01:50 PM
Updated 07/09/2023, 06:31 AM

Below is a monthly chart of the gold/silver ratio. We see that since 2003, the market has tested the 80 number four distinct times (the red boxes in the chart). In each test, the market was able to create a spike above 80, but was pushed down and sent lower. Is this thus a great time to sell the gold/silver ratio -- to buy silver and sell gold?

Monthly Gold-Silver Ratio

I certainly think the technicals favor that. And if we zoom down to the weekly chart, we see that the ratio has broken out of the steep upwards channel it was in from July 2014 to January of 2015, and has been rangebound since then. This suggests a potential distribution after a rally, which could lead to a sell off and a decline in the ratio.

Weekly Gold-Silver Ratio

My one cause for concern is the trendline going back to gold's highs -- and the ratio's lows -- in September of 2011. This trendline is still holding strong, and thus may be a sign that the gold/silver ratio is headed higher. Some traders may prefer to wait to sell the gold/silver ratio until this trendline is broken.

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