CHART: Gold-silver ratio nears bullish breakout

Silver bulls have enjoyed a nearly 5% rise from 56-month lows of $15.41 an ounce hit November 6. The closely watched gold-silver ratio on Thursday was roughly 73.5.

At around 73 the gold/silver price ratio is now close to levels last seen at the height of the global financial crisis versus long-term average of around 60.

InvesTRAC passed on this price graph to MINING.com indicating a bullish pattern emerging for the two precious metals:

The technical research and investment blog notes that when the ratio is rising then the precious metals decline and when the ratio is falling, both silver and gold usually go up.

This is because silver usually leads gold up and down says InvesTRAC:

Have a look at the ratio in the daily chart below…it rose from 62.3 to 75.1, almost 21 percent and in the process gold dropped from 1344.7 to 1132.05 (-17%) and silver fell even more from 21.58 to 15.07 (-30%). Now the ratio is encountering support from its four month old uptrend and just needs to close below 73.0 to open the way for further weakness…in the event of a declining ratio we should see the silver rising faster than gold and the gold and silver shares rising faster than the metals.

The InvesTRAC short term model shows that the OB/OS indicator has started to fall from 100 and is now 91.6 and the short term forecaster shows a low for Dec 3, rally to Dec 12 then down until January 21…whether it follows this projection or not remains to be seen but the evidence supports the case for strength in the precious metals complex over the coming weeks.

Source: InvesTRAC