“Gold Leads Silver”

Steve Saville correctly points out that gold leads silver in the early stages of precious metals bull markets.

Gold Leads Silver

The most recent example is the one we often point to from December, 2015 as gold bottomed on December 3rd and turned up on January 4th. This led silver, which bottomed on December 14th and turned up in late January. The gold miners were more in line with silver than with gold. Gold tends to lead not only silver and the miners, it tends to lead inflationary phases as well after bottoming 1st amid liquidations and/or deflationary impulses. In the case noted here, commodities and stocks then followed, generally bottoming in February.

So, with my Still Waiting on Silver article sitting there in bright lights at Gold-Eagle, perhaps Steve noticed it or perhaps it’s a subject he had planned anyway. But I wanted to bore into the details a bit more to clarify with respect to my own article.

Yes, gold does tend to bottom and turn up into new bull markets before silver. But the miners tend to correlate better with silver during the dynamic shorter-term rallies the sector experiences, especially when the silver gold ratio (SGR) gives a warning. Again, here’s the 1st half 2016 case with the SGR giving first a positive divergence and then a warning (after a hysterical spike upward), in the bottom panels.

gold

Wording is important. Again, I have no clue whether my recent focus on silver leadership played into Steve’s process or not but to be clear, I am not talking about a long-term bull market here (the line for gold is clear at 1378). Insofar as gold bugs are looking for a rally continuation, it would be helpful for silver to get in gear in relation to gold per its more pleasing CoT alignment. That’s the gist of it.

Silver tends to lead the rallies, even or especially the hysterical ones that do not have proper fundamentals in place. Again reference May 30th 2016’s post with a focus on the last 3 words of the title.

AMAT Chirps, b2b Ramps, Yellen Hawks and Gold’s Fundamentals Erode

Reference also Q1 2011, when silver blew off and blew out, signaling the end of the post-2008 bull market for the sector even as gold continued to climb.

Dialing ahead to today, we have continually noted that the proper fundamentals are not yet in place to make the gold sector at all unique among assets rising in an inflationary mini-hysteria. That tends to come after the hysteria – led on this cycle by stocks – liquidates. So nothing I personally have written is done to support enthralled gold bugs’ fetishistic wishes for a new bull market. We’re simply managing the short-term rally’s potential for continuation or failure and watching silver’s role in that.

Now with that out of the way I can move on with my day, which looks to be interesting. :-)

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