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.

GoldSilverRatio

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.

Summary

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.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst - Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia and the New York Times. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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