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Bullish signal on Gold-to-Silver ratio with more downside expected on Gold

Previous buy signal on Gold

In a previous analysis posted on 22 August 2017 we identified a strong bull signal on the gold monthly price chart:

2017-08-22_GoldUTM

Gold monthly price chart, 22 Aug 2017

The recommended strategy was to buy on a price set-back in the $1,280-1270 area as per the green-circled area on the weekly price chart here below to target the upper volatility band at ca. 1,360 on the monthly price chart above:

2017-08-22_GOLDUTW

Gold weekly price chart, 22 Aug 2017

Few days later the FED annual economic policy symposium held in Jackson Hole induced a gold price correction to $1,276 exactly in the middle of the proposed buying range as we tweeted:

2017-09-23_Gold_Buy_Signal_Tweeted

2017-09-23_Gold_Buy_Signal_Activated

Some days later we suggested  to move the stop-loss to breakeven:

2017-09-23_GOLD_STOPLOSS

Finally our $1,360 target was reached with the gold price peaking at $1,357.6 on 8 Sep 2017 (just $2.4 short of our target):

2017-09-23_GoldTargetReachedAndReversal

From that level the gold price appears to be forming a bearish reversal candle on the monthly chart here above although the trend is still pointing higher.

Gold-To-Silver Price Ratio Heading Higher

However, on the weekly chart the reversal candle pattern appears even more obvious:

2017-09-23_GoldWeeklyReversal

In parallel we tweeted on 20 Sept 2017 about a strong bull signal on the Gold-to-Silver price ratio that is known to be trading in opposite direction to gold:

2017-09-23_GOLD_To_SILVER_Ratio_Bullish

We should therefore expect the price of the ratio to reach into the upper volatility boundary area around 80. Since the signal on the gold-to-price ratio is very clear compared with the gold price chart it may be a good idea to buy the gold-to-silver ratio rather than selling gold.

Strategy

Based on the gold-to-silver weekly price chart we should also expect a modest set-back before activating a long trade:

  • Buy if gold-to-silver price moves back below 75.5 (green arrow).
  • Place the stop-loss below the double bottom around 74.1 (horizontal red line).
  • Target upper volatility band (81 at the time of posting).
  • Profit/loss ratio: ca. 5:1.5 or higher than 3:1.

1 Comment

  1. Trade has been activated and is on track to reach target.

    Reply

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