Precious metals have been the strongest corner of the market this year. It’s not a surprise when you consider the coronavirus pandemic, the resulting economic crash and now hefty monetary stimulus from central banks. Precious metals might not have controlled supply like
BTCUSD
, but it’s definitely MORE controlled than fiat currencies.
Gold and silver both took a hit when volatility hammered all financial markets in March but they’ve stabilized more recently.
Silver in particular is important because it’s normally the high-beta stepchild of gold. It’s often compared to gold in a ratio, which recently hit its highest extreme in at least a century. That means silver was historically super cheap.
The gold/silver ratio is also interesting as a sentiment indicator because it can peak at times of bearishness in precious metals. Then, as it fades, both silver and
XAUUSD
tend to advance in price – with silver leading he charge on a relative basis. This occurred between November 2008 and March 2011, and again January-July 2016.
Getting back to the simple price of silver in U.S. dollars. It formed a triangle in April and early May. It quickly overtook the 200-day simple moving average (SMA) and spent the last two weeks consolidating above it. Now with the prospect of more geopolitical risk (China), more weak economic news (payrolls next week) and more money printing (FOMC on June 10) the backdrop could be favorable as well.
On the flipside, if conditions get more bullish and precious metals fade, the 200-day SMA becomes an effective risk-management zone.
BTCUSD
, but it’s definitely MORE controlled than fiat currencies. Gold and silver both took a hit when volatility hammered all financial markets in March but they’ve stabilized more recently.
Silver in particular is important because it’s normally the high-beta stepchild of gold. It’s often compared to gold in a ratio, which recently hit its highest extreme in at least a century. That means silver was historically super cheap.
The gold/silver ratio is also interesting as a sentiment indicator because it can peak at times of bearishness in precious metals. Then, as it fades, both silver and
XAUUSD
tend to advance in price – with silver leading he charge on a relative basis. This occurred between November 2008 and March 2011, and again January-July 2016.
Getting back to the simple price of silver in U.S. dollars. It formed a triangle in April and early May. It quickly overtook the 200-day simple moving average (SMA) and spent the last two weeks consolidating above it. Now with the prospect of more geopolitical risk (China), more weak economic news (payrolls next week) and more money printing (FOMC on June 10) the backdrop could be favorable as well.
On the flipside, if conditions get more bullish and precious metals fade, the 200-day SMA becomes an effective risk-management zone.
