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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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