News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Mixed
Oil - US Crude
Bearish
Wall Street
Mixed
Gold
Mixed
GBP/USD
Mixed
USD/JPY
Bullish
More View more
Real Time News
  • Tune in to @IlyaSpivak 's #webinar at 10:00 PM ET/3:00 AM GMT for insight on the cross-market outlook in the week ahead. Register here: https://t.co/E213bTtq5C https://t.co/Sj2NSgZ4xD
  • Central banks often deem it necessary to intervene in the foreign exchange market to protect the value of their national currency. Learn how central bank intervention can impact your trading here: https://t.co/8G8mUX4so6 https://t.co/MAn2EL32sU
  • In the week ahead, around 25% of S&P 500 companies will release their results, including GE, Johnson & Johnson, 3M, Microsoft, Boeing, AT&T, Facebook, Apple, Tesla, Visa and Amazon. Read more on my earnings outlook report. https://www.dailyfx.com/forex/fundamental/forecast/weekly/title/2021/01/17/Dow-Nasdaq-SP-500-Outlook-Earnings-May-Bring-Positive-Surprises.html
  • Wall Street Futures Update: Dow Jones (+0.20%) S&P 500 (+0.28%) Nasdaq 100 (+0.51%) [delayed] -BBG
  • Nearly 80% of the S&P 500 constituents closed in the red on Friday, dragged by materials (-0.43%), financials (-0.38%) and energy (-0.34%) whereas defensive utilities (+0.20%), real estate (+0.15%) and communication services (+0.02%) outperformed. https://t.co/vf08Fhfvxd
  • Traders focus a lot of their energy on spotting the perfect time to enter a trade. While this is important, it is ultimately where traders choose to exit trades that will determine success. Learn about the three types of trading exit strategies here: https://t.co/muYkTNXH7s https://t.co/fSRW0Z8mNQ
  • There are three major forex trading sessions which comprise the 24-hour market: the London session, the US session and the Asian session. Learn about the characteristics of each session here: https://t.co/reRmDe1Ksp https://t.co/RyMqsHehsY
  • RT @GunjanJS: This is pretty wild. Last year, in RECORD year for options, about 30 million contracts traded daily. This year, it’s been mo…
  • Implementing a trading checklist is a vital part of the trading process because it helps traders to stay disciplined, stick to the trading plan, and builds confidence. Learn how to stick to the plan, stay disciplined, and use a checklist here: https://t.co/SQUCCZ9dzS https://t.co/KD6mfkiCaW
  • What are some technical and fundamental factors affecting the equities market? Get your free forecast here: https://t.co/YQG1aaIT8C #DailyFXGuides https://t.co/TEoSjMpMBo
Silver-Gold Relationship Evolving in a Bad Way for US Dollar

Silver-Gold Relationship Evolving in a Bad Way for US Dollar

Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- USDOLLAR Index back to last week's lows, below September and October swing lows.

- Gold/Silver ratio breaks uptrend from mid-2011 low as Silver breaks out.

- As market volatility rises, it's a good time to review risk management principles.

It's day 2 in the post-Doha world, and in the words of Emmet Brickowski, "everything is awesome." Investors have shrugged off the lack of supply freeze from the world's largest suppliers as the implications for the Federal Reserve's easing policies are emerging: the Fed will have to keep rates lower for longer to help protect the US financial system from a series of potential defaults in the energy sector.

Whether or not the future actually plays out in such a manner is another tale to be told, but for now, higher yielding currencies and risk-correlated assets are jockeying for position over the Japanese Yen and the US Dollar. Equity markets are soaring: the Japanese Nikkei 225 has retaken all of its losses since March 30; the German DAX 30 is at its highest level since the first day of 2016; and the US S&P 500 just crossed 2100 on its way to its highest level since December 2, 2015.

For US equities, one of the more reassuring developments in markets could be what's going on with the US Dollar and precious metals. With the Fed acting like Goldilocks - the economy isn't hot enough to raise rates yet, but not cold enough to spur a growth scare - it stands to reason that, with the US presidential election around the corner, the Fed won't be too keen to raise rates mid-year. (This may be setting them up for a trap at the end of 2016 or the beginning of 2017, when they're forced to play 'catch up.')

Likewise, with commentary from various officials suggesting that inflation could overshoot, the recent turn higher in agriculture and base metal commodities suggests that fiat erosion may be creeping into the back of traders' minds. Silver prices, which we discussed last week as having the tendency to lead when precious metals rally broadly and the US Dollar falls, is breaking out today (chart 1 below).

Chart 1: Silver Prices Daily Chart (September 2014 to April 2016)

Silver-Gold Relationship Evolving in a Bad Way for US Dollar

The Silver rally alone doesn't tell the whole story. As we discussed last week, Silver prices tend to outpace Gold prices when the US Dollar is struggling, and vice-versa. This is why the Gold/Silver ratio has been so important to watch: the ratio continually climbed after precious metals peaked in mid-2011. This week, however, we may be witnessing a breakdown as the uptrend in the Gold-Silver ratio.

Chart 2: Gold/Silver Ratio Weekly Chart (2010 to 2016)

Silver-Gold Relationship Evolving in a Bad Way for US Dollar

For the USDOLLAR Index, Silver prices outpacing Gold prices could spell trouble as the greenback gauge is back to testing its lows from last week. This is further progress towards breaking down through the swing lows dating back to September 2015.

Chart 3: USDOLLAR Index Daily Chart (June 2015 to April 2016)

Silver-Gold Relationship Evolving in a Bad Way for US Dollar

Read more: USD, Fed Implications Around Oil’s Doha Disappointment

If you haven't yet, read the Q2'16 Euro Forecast, "EUR/USD Stuck in No-Man’s Land Headed into Q2’16; Don’t Discount ’Brexit’," as well as the rest of all of DailyFX's Q2'16 quarterly forecasts.

--- Written by Christopher Vecchio, Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher's e-mail distribution list, please fill out this form

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES