Gold and silver usually trend together, everyone knows that.
But did you notice that recently they've been taking different paths?
Gold has skyrocketed to all-time highs -- while silver has been heading lower.
With these two precious metals usually "joined at the hip," it begs the question: Is one leading the way for the other to follow? And if so, which one is leading?
Or, are they headed in separate directions altogether -- despite the historically positive correlation?
You probably remember silver's parabolic "blowoff" rally that reached an all-time high back in April. You may also remember what came next: an even sharper reversal that pushed prices 35% lower in a few weeks.
Some would say that these wild swings only prove that gold and silver are simply unpredictable -- but we at EWI beg to disagree.
Commodities, in Elliott wave terms, tend to see their most explosive action in fifth waves -- unlike stocks, where it's third waves that are most powerful. Here's why: Stock rallies are driven by greed. Commodity rallies are driven by fear, and fear gets stronger as prices get higher.
According to the Elliott wave model, wave five is the final wave in an impulsive wave sequence. What follows a fifth wave? A partial retracement -- or an outright trend reversal.
You could certainly describe Gold's recent jump as "explosive." Whether or not it turns out to be a fifth wave, time will tell, but EWI's Metals Specialty Service Editor Mike Drakulich is watching gold and silver closely right now for signs of the next move.
Any time Mike sees the kind of volatile action we saw in silver a few months ago -- and what we're seeing in gold right now -- he stays on high alert for his subscribers, as dramatic change can come at any moment.
Today's trading (August 11) saw gold prices drop 3%, intraday. Metals Specialty Service posted this message to subscribers after the close:
"... this is an incredibly volatile and difficult environment, the price moves are huge, caution is advised. We still have to realize that this could just be a large correction in a continuing huge blowoff, but today's decline is definitely a possible chink in the blowoff's armor."
"So I am going to remain on a high state of alert. A close below [this price level in gold] remains a key for a possible bearish outcome."