Gold / Silver Ratio: EUR/USD, GOLD, Silver Forecasts

The Gold/Silver Ratio as a preeminent indicator to overbought/ oversold Gold, Silver and both Gold Vs Silver closed at 74.01. The 80.07 highs from 1- 5 years on a break targets the next 10 – 20 year historic point at 83.85. The highest price seen since 1915 was 97.31 July 1941 and 93.33 November 1990. Historic lows since 1915 are found in July 1968 at 19.00’s and 19.22 July 1968. Lows at 32.00’s occurred in 1975 and 2011. The 1 and 2 year range is found between 80.07 – 69.32 and 60.20, 60 day range between 77.86 – 71.42 and 30 day from 74.39 – 71.42. The 24 hour range is located between 74.40 – 73.60 and the average of the historic range from MA’s between 1 -25 years is 33.64.

What drives the Gold/ Silver Ratio is a positive correlation to Gold and negative correlation to both Silver and EUR/USD. Silver negatively correlates from 1 – 7 year averages between minus 88%- minus 97% and barely above negative 50% in averages from 10 – 25 years. EUR/USD negatively correlates from 1- 7 year averages between minus 0.08% to minus 74% and remains below minus 50% in averages 10 – 25 years. Gold is positive throughout all averages. The Gold and Silver price on its own volition correlates to each other in averages from 1 – 25 years from positive 87% – 98%. Gold drives the Gold /Silver ratio but Gold is severely overbought while Silver is way oversold.

What drives Silver in the Gold / Silver ratio are averages 2, 3, 5, 7 then 1 year. What drives EUR/USD in the Gold / Silver Ratio are averages 2, 3, 5 then 7 year. EUR/USD vs Silver by themselves are driven specifically by the 2 year average in a 90% correlation. Next averages, 3, 5, 15 and 20 are barely above positive 50%. EUR/USD Vs Gold by themselves are driven by the 2 year average at 82$ then the 20 year at 60%, 15 year at 57%, 25 year at 52. Overall, EUR/USD more closely aligns with Gold than Silver. The polemic with the EUR/USD relationship is the Gold/Silver Ratio is overbought, Gold and Silver prices by themselves are all oversold yet below respective averages and EUR trades far below its 25 year average. Its a monetary policy phenomenon rather than technical driving current relationships. If the Gold/Silver Ratio is viewed from averages 1-5 then the average range move is 21.31 and seen from averages 1 -7 years then the average becomes 26.01. A significant move on Gold and Silver could easily be seen in development stages.

Gold Silver Ratio must break the 1 year average at 73.60 below from the 74.01 close to target the 2 year average at 69.16 and 3 year average at 65.49. Below 65.49 then the Gold/Silver ratio faces solid supports at 61.26, 61.18 and 61.07. The 10, 15 and 20 year averages at 58.96, 61.07 and 61.26 become overbought on price rises. Averages from 3 – 20 year are all overbought. Targets from 1 – 25 year averages are located at 74.86, 74.05, 72.47, 71.07 and 70.50. Targets above include recent highs at 74.39 and 77.86.

Gold from 1088.90 trades below averages between 1- 10 years and above the 15, 20 and 25. Price must first break the 10 year average at 1135.35 and 1 year average at 1179.46 to target 1228.26, the 2 year average. Above 1228.26 then next averages are found at 1314.56 and 1318.46, the 3 and 7 year averages. Targets include 1063.06, 1113.85, 1138.36, 1152.30, 1165.14, 1211.68, 1221.92.

Silver from 14.72 is below averages from 1 – 15 years and above the 20 and 25 year at 12.61 and 10.99. To head higher Silver must break the 15 year average at 15.09, the 1 year at 16.03, 2 year at 17.89, 10 year at 19.92 and 3 year at 20.56. Targets from lowest to highest, 5.57, 11.82, 14.78, 15.24, 15.59, 15.77, 17.83 and 19.92.

Brian Twomey, Inside the Currency Market, btwomey.com

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