Silver Shares? Nobody Cares

Almost nothing happened on the precious metals market yesterday, or at least that may seem to be the case as the first sight. And that’s true if one doesn’t count the spike in GLD’s volume, but there was something else that actually should have caught one’s attention and it probably wasn’t the case for many gold traders. Silver stocks just broke to new monthly low. What does this tell us?

It’s a subtle clue that the next big move in the precious metals sector is going to be downside. Think about it – silver stocks had an excellent reason to rally – silver moved visibly higher in the past several days. Yet, instead of showing similar strength, the silver miners moved back and forth moving to new lows. That’s a clear sign of weakness. Let’s take a closer look at both markets.

Silver Stocks’ Underperformance

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Silver - Continuous Contract

Global X Silver Miners ETF

The recent move higher is clearly visible in case of silver and it’s clearly absent in case of silver stocks. Since the mining stocks often lead metals and are showing relative strength or weakness as a sign of what’s to come, one should currently be expecting a turnaround in silver rather than in the miners.

Of course, if the financial system was destroyed, WW3 broke out etc., then gold and silver would soar, but nothing like that is likely to happen shortly and the above technical rule for the precious metals is likely to apply.

As we mentioned earlier, the other noteworthy development was the spike in the GLD ETF volume that accompanied yesterday’s decline.

GLD’s Price-Volume Link

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GLD SPDR Gold Shares

The above is a bearish development, especially that it was preceded by a move higher on low volume. The volume generally rises when the market is moving in tune with its true direction and declines when it moves in the opposite way. It’s currently clear that the price-volume link suggests that gold is in a downtrend and the last several days of pause is just that – it’s not a prolonged bottoming process.

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Disclaimer: All essays, research, and information found on the Website represent the analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong ...

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