The Gold/Silver Ratio Looking Bullish for Precious Metals

CandianDuring precious metals bear markets, gold tends to decline less than silver. During precious metals bull markets, silver tends to rise more than gold.

With that in mind, I thought it would be wise to pass along Michael Oliver’s comments this past week on the Gold/Silver Ratio.  Essentially we are very close to a breakout in the gold/silver spread in favor of silver.  In conjunction with his price and momentum charts shown on your left, here is what he said:

“An important metric for the emergent bull in gold and silver. The spread chart, above, is available on numerous internet sites. Shows a persistent trend favoring gold/disfavoring silver ever since those markets peaked in the later half of 2011.

 “Long?term momentum of that spread, below, argues that if any weekly spread readings drops below the 50?wk. avg. by more than the prior teasing drops (there have been four marginal dips below that average/zero line over the past several years, but only marginal), then assume the spread is turning. Going forward that signal will favor silver over gold. And often in bull trends that’s the juxtaposition. Poor man’s gold takes the lead. Right now the spread is 78. Close out this week at 74.9, or next week at 75 (add .10 per week) and this long?term momentum trend changes, favoring silver/disfavoring gold.” (www.OliverMSA.com)

Note: At the end of this week, gold closed in New York at $1,234.60 and silver closed at $16.31. That calculates to 75.70.  This may be another bit of evidence that a new bull market in gold and silver is underway.

The Canadian Dollar Bodes Well for our Portfolio

ModelA rise in the Canadian dollar which has now broken out to the upside against the dollar has been helping our Model Portfolio, especially given the fact that most of our gold and silver stocks are denominated in Canadian dollars. As you can see from Michael Oliver’s momentum chart, the Canadian dollar is breaking out to the upside.GoldSilver

The upturn in quarterly and annual momentum of the Canadian Dollar is another voice in the chorus. A breakout occurred last month on both. Expect a move up to the falling 36?mo. avg. (with declines along the way). Reassess there. Meanwhile, this turn is yet more evidence in MSA’s case for a commodity upturn that makes noise. (www.OliverMSA.com)

 I would call your attention also to the fact that the dollar index is also nearing a momentum change indicating a breakdown of the dollar that too would be super bullish for gold. Relating to the dollar, we quoted Michael in our April 1, 2016 weekly letter. He said, “In recent reports on the Dollar Index I’ve identified the 95 to 94.50 level as negative—if closed at or below on a monthly closing basis. A 94.50 monthly close will credibly break this multi?year uptrend on quarterly momentum. This month’s low trade has been 94.57. The dollar index closed this week at 94.68.

About Jay Taylor

Jay Taylor is editor of J Taylor's Gold, Energy & Tech Stocks newsletter. His interest in the role gold has played in U.S. monetary history led him to research gold and into analyzing and investing in junior gold shares. Currently he also hosts his own one-hour weekly radio show Turning Hard Times Into Good Times,” which features high profile guests who discuss leading economic issues of our day. The show also discusses investment opportunities primarily in the precious metals mining sector. He has been a guest on CNBC, Fox, Bloomberg and BNN and many mining conferences.