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Gold Price Diverges Against Silver Price Warning of a Turn

Gold Price Diverges Against Silver Price Warning of a Turn

2018-09-11 00:25:00
Jeremy Wagner, CEWA-M, Head of Education
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The gold to silver ratio is at the highest level since the early 90’s. We are anticipating this ratio to turn lower with silver outperforming gold.

The video above is a recording of a US Opening Bell webinar from September 10, 2018. We focused on the Elliott Wave and patterns for gold, silver, Dollar Index, EURUSD and GBPUSD. Though we may see some short term USD strength, another round of dollar weakness appears on the horizon.

Gold price chart holds above August low

On August 30, we forecasted a shiny future for gold. Gold’s price chart has advanced in an impulsive wave and is now correcting sideways. This sideways correction likely holds above the August 15 low of 1160. We are unsure of the corrective wave that is unfolding, but so long as gold prices remain above 1160, the pattern is bullish.

gold price chart with elliott wave labels forecasting a rally towards 1280.

Silver prices punch new lows

Meanwhile, silver prices continue to be weak and trade near two-year lows. We are counting the sell-off as a ‘Y’ wave of a complex W-X-Y downward correction.

The divergent behavior between gold and silver where silver pounds new lows and gold holds above often occurs near important turns. Therefore, this behavior is symptomatic of a price reversal looming nearby.

Silver chart with elliott wave labels hinting at a rally forming from nearby levels.

The gold-silver ratio at 23 year extreme

The divergent behavior between gold and silver has naturally driven the gold-silver ratio to its highest level since 1995. It is rare for the ratio to be at these lofty levels. Therefore, gold is viewed as expensive relative to silver. Therefore, if we do see a turn towards strengths in these metals, we are anticipating silver to outperform gold to the upside.

US Dollar Index Elliott Wave Analysis

US Dollar Index has been trading sideways for the past couple of weeks. My analysis on the current Elliott Wave count for dollar index is that we are in a corrective (b) wave higher. We may see a test of 96 then anticipate another strong leg lower to 91-93.

The bearish view is valid so long as dollar index holds below 96.98.

us dollar index price chart with elliott wave labels showing the potential for more losses in the medium term.

EURUSD Elliott Wave Chart Points to Multi-Month rally

Since August 20, we have been anticipating a multi-month rally in EURUSD as the Elliott Wave from February 2018 concludes. At this stage of the chart, it appears this EURUSD rally is not over. In the short term, I would not be surprised to see EURUSD drop to below 1.1530, possibly into the 1.1450-1.1500 zone. From there, we will look for bullish signals on a proposed rally above 1.1750 towards 1.20.

Sentiment has certainly fed a movement higher in EURUSD as traders dropped from being 55% long to 41% long over the past week. This further indicates a bullish bias.

eurusd price chart with elliott wave labels forecasting a small dip prior to another rally above 1.1750.

Elliott Wave Theory FAQ

When do I start counting Elliott Wave?

This is a common question of newer traders to Elliott Wave Theory. There are a couple of patterns I look for when starting my analysis. The Elliott Wave triangle pattern is one of those starting points because triangle form at certain spots within the Elliott Wave count. Therefore, if a triangle has been properly identified, we can then narrow the possibilities of the Elliott Wave count to begin to formulate higher probability patterns.

Learn more with “Forex Education : How do you begin counting Elliott Waves?

After reviewing the guides above, be sure to follow future Elliott Wave articles to see Elliott Wave Theory in action.

If you are seeking further study into Elliott Wave Theory, read about our expert tips in our beginners and advanced trading guides.

---Written by Jeremy Wagner, CEWA-M

Jeremy Wagner is a Certified Elliott Wave Analyst with a Master’s designation. Jeremy provides Elliott Wave analysis on key markets as well as Elliott Wave educational resources. Read more of Jeremy’s Elliott Wave reports via his bio page.

Communicate with Jeremy and have your shout below by posting in the comments area. Feel free to include your Elliott Wave count as well.

Discuss these markets with Jeremy in Monday’s US Opening Bell webinar.

Follow me on Twitter at @JWagnerFXTrader .

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

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