Silver Looks Bearish Compared To Gold

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Gold and Silver are significantly up since November. Although the move is worth watching, we need to remember that prices don’t move in a straight line, they zig-zag. Both metals remain in bearish territory and bounces like these are normal after prices fall significantly.

Gold (yellow line) and Silver (blue area) since 2014

Gold (yellow line) and Silver (blue area) since 2014. Source: MetalMiner.

We pointed out last week that gold was showing strength. However, silver seems weaker than gold. While gold is only off 5% from hitting a 10-month high (see orange arrow), the gray metal is still 20% off (see dark blue arrow).

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These two metals move together and usually when one of them is not following that makes the move less reliable. We saw this happen in August 2013 when silver was falling to catch up with gold.

Some argue that investors are moving money into gold and that global economic uncertainty will push the metal higher. However, this doesn’t always happen. We’ve seen periods when gold fell with the general market and for this reason we wouldn’t rely solely on this argument.

Something that does work is the strong inverse relationship between gold (and silver) and the dollar. At this point, the dollar keeps pointing to the sky (it recently hit a 11-year high) and that is likely to weigh down gold/silver prices.

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