Gold/Silver Ratio: Flirting with Support

Ahead of tonight’s FOMC the Gold/Silver Ratio Chart is worth more than a passing glance

In the bullion trade, the Gold/Silver ratio is known as the “mint” ratio. I won’t bore you with the reasons; Google can help there. Needless to say, it involves a double metal standard and the USA in times past.

What is interesting is the mint ratio daily chart today. As I have previously stated, the FOMC is the only game in town this week. As the world desperately hopes that Ms. Yellen will give some clarity in the fog that has become US Monetary Policy, this chart may show some interesting developments at the end of the week.

The mint ratio has been forming a large symmetrical consolidation pattern since the Silver rally of early July. It is now seriously flirting with the downside of the triangle as it reaches an apex signalling a breakout one way or the other. Symmetrical triangles in charting do tend to be continuation patterns of trends I note.

Possible breakout on the way?

The rather busy looking chart above does contain some different pieces of information that portend a possible breakout.

The RSI is in solidly neutral territory meaning a break up or down is not constrained by an already oversold or overbought position.

The MACD fast moving indicator has crossed below the slow one.

The chart itself shows that the red line, the 100-day moving average, has been tested and rejected three times since July.

Volumes (the bars on the bottom of the top window) have remained subdued since the initial aggressive move down.

Looking at the chart levels themselves. Resistance sits at 70.10 descending trendlines followed by 70.65 the 100-dma. Support is at 67.77 with multiple daily lows at the 65.40 area.

Clearly, this is a bearish looking chart with a daily close below 67.77 signalling a potentially strong move down from a technical perspective. However false breaks and dawns do happen in trading. So as a word of caution to guard against this, I would be looking for at least two daily closes below the ascending trendline and also a spike in volumes.

The triangle consolidation pattern is coming to an end one way or another. Quite possibly driven by the FOMC’s actions this evening. Nevertheless, technical analysis is not an exact science and thus, should the break occur, look for confirming indicators to ensure the break is real.

About Jeffrey Halley

 Jeffrey Halley Based in Singapore, Jeffrey has over 25 years experience in the financial markets, having traded currencies, options, precious metals and futures. Jeffrey started his career at Barclays Bank in New Zealand. However he has spent most of it in London and Asia. Jeffrey focuses on the Asia time zone across asset classes. A regular commentator on business news TV and Radio, he is originally from New Zealand and holds an MBA from Cass Business School, London.