Gold/Silver Ratio | Channel Slope to Watch | Fib LevelsFellow Traders,
This is not a trade idea - yet - but rather an informative piece of info on the Gold/Silver ratio that precious metal traders should take note of.
I believe the channel slope posted here is validated and I see several points of contact that shows me the slope is still in play. As we know, precious metals have been falling since Apr 2011, which coincides with the low shown here on the Gold/Silver ratio. Why is this the case? Silver is more volatile than Gold. When precious metals prices rise, Silver tends to outperform Gold, hence from 2008 to 2011, we saw the Gold/Silver Ratio decreasing. When the prices of precious metals fall, Silver falls to a greater extent than Gold, hence we see the ratio of Gold/Silver increasing.
What I see here corresponds to the recent consolidation of Gold and Silver without any clear direction of movement. What's interesting to me is also that we see the Gold/Silver ratio pausing at the completion of the AB=CD mark at around 74.27 and closer to the 75 price level.
Let's see if this chart and slope can give us hints to a change of behaviour in the Gold and Silver prices in time to come. I will be looking for signs where the Gold/Silver ratio reverses and breaks downwards and out of the channel. If this happens, we will see a significant move in both Silver and Gold in my opinion.
Until then, keep watch.
Luke
