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Metals , ETFs , Investing

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.

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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.

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Gold's Breakout to 9-Year Highs: One Path Versus Two the Sides of Fed Stimulus

On June 5, our Metals Pro Service showed subscribers a gold chart and said a price action was "opening the door to considering bullish potential" beyond the 2020 highs. The $140 per ounce rally to 9-year highs followed this analysis.


How Small Traders Too Often Lead the Way into Stock Market Danger

When the trend turns in major stock indexes, a curious thing often follows: certain traders think the old trend is still unfolding. In this video, EWI's Brian Whitmer shows you exactly how this happens and why it's so dangerous.

Why You Should Expect “Price Deflation” Just Ahead

Our July Global Market Perspective notes that there has been a "distinct relationship" between two economic / monetary indicators over the past 20 years. The annual change in one of them has "collapsed." Learn what our global analysts expect for the other indicator "over the next 18 months or so."