Thursday, December 23, 2010

Silver & Gold poised for reversal based on Trend Momentum Divergence

Silver had a stellar rise with a 73.5% YTD performance and still holding above the steep Uptrend line support. Momentum studies are DIVERGING with current trend and pointing to a waning strength in the move. Waiting for the pending Short signals in DMI and ROC to unfold.

Gold has performed rather bleak given all the media attention as a main inflation wealth protection vehicle reaching 26.3% YTD return.

Momentum studies are showing falling strength in the current trend and I'm watching for similar pending technical Short signals.

Interesting chart here is the Gold-to-Silver ratio and its relationship with the US Dollar Index.
Since June till November there was a loose positive correlation that dissipated after the FED announced its QE2 plans.

Based on this chart I would look for a bounce in the Gold/Silver ratio which would come with a strong pullback in Silver which outperformed strongly Gold since August 2010.

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