Gold and Silver Divergence Indicates an Unstable Market

by John Galt
February 21, 2017 05:20 ET

Last week’s moves in gold and silver provided a divergent point in the precious metals markets as silver broke through a short term resistance point of $18 per oz., while gold struggled to continue it’s upward blitz.

First gold, which put on a show to start the week but then stalled at the $1240 level:

Unless gold can complete the move through the technically important $1280 level with improved volume to break the downtrend in participation for the metal, the price will probably roll over and retest the December 2016 lows.

Silver on the other hand is not only benefiting from increased industrial demand, but a technical breakout above the $18 per oz. long term resistance area:

However, like gold it is failing to get good confirmation of this breakout due to low volume. The new uptrend looks promising however any price moves below $17.50 to the $17.60 area on higher volume should be viewed as bearish with a potential break of the 50 DMA as a rally failure and declines back to the $15 trading area as imminent.

Until President Trump determines the amount of inflation he intends to generate with government expenditures on infrastructure and where his trade policy will actually be centered, look for the divergence in gold and silver prices to continue with silver possibly recovering the $20 level on bullish economic expansion while gold breaks down as a currency play against a stronger dollar. Most importantly, watch for a breakdown of the Euro to parity with the USD which would be gold bearish and dollar bullish which will break the back of long term precious metals speculators until seasonal factors return later this year or some global event which would prompt panic buying at lower prices.

  • Gregory Marsh

    Excellent article John…been a long time reader of yours and always enjoy your insights.

  • Yes and this is the reality. It is not stable

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