Gold, Silver, And USD Index – Three Important “Nothings”

Today’s analysis is going to be different than the other ones. We usually discuss what happened on a given day, week, or month and we elaborate on what it changed and what it didn’t change in case of the outlook for gold, silver, and mining stocks. But not today. Today, we are going to focus on what didn’t happen. At the first sight, it seems that this means that there was no new signal. That’s not the case. The three important “nothings” that we will discuss in today’s article have important implications for the following days. That is if one knows where to look.

Let’s start with the first chart (charts courtesy of http://stockcharts.com).

Nothing Changed in the Gold: Silver Ratio

The gold to silver ratio broke above the 2003, 2008, and 2016 highs and it didn’t move back below them. In this case, “nothing” means that the breakout is being verified and with each passing day when the ratio is above the previous highs, the continuation of the rally becomes more and more probable.

Moreover, since the rallies in the ratio tend to be sharp, it means that we can expect the continuation of the move that’s very visible. This most likely means a big decline in silver.

No Changes in Silver

And by saying “no changes”, we mean practically no changes in terms of the daily closing prices. Silver moves back and forth on an intraday basis, but ultimately it still ends the session at about $14.15 – $14.20. At least that’s what we saw in the last 5 sessions.

That’s interesting because this decline (and many other declines) are characterized by periods of very high volatility that are followed by periods of very low volatility and then the cycle repeats, with no “average volatility” weeks. The pauses that we saw previously took place in early July, late July and early August and then in late August (ok, in case of the latter the volatility was higher than previously).