Small Steps – Gold and Silver Close Higher for Fourth Consecutive Day

May 15, 2017 - 5:21pm

 by Gary Wagner

Although gains have been modest, both gold and silver have closed higher for the last four consecutive trading days. As of 3:30 Eastern Standard Time, gold is currently trading up $3.10 (0.24%), based on the June 2017 futures contract, at $1230.70.

Silver has been gaining strength during the same period, with a greater daily percentage gain than gold. Silver futures are currently up $0.22, which is a net gain of 1.36%, at $16.62. Although gold and silver tend to run in tandem regarding price direction, typically silver will have a greater percentage gain on days when the precious metals close higher as well as a higher percentage drawdown on days when the precious metals close lower.

The Gold-Silver Ratio

This can be seen in the gold-silver ratio which is currently at 73.959. The gold-silver ratio was widening through the month of April as gold and silver traded under pressure to lower pricing. On April 7th, it took roughly 68 ½ ounces to purchase 1 ounce of gold. By May 10th the gold silver ratio had widened to 75 ¼ ounces of silver to buy a single ounce of gold. This widening was a direct reflection of both gold and silver trading under pressure, with silver having a much steeper percentage drawdown than gold.

For the last five trading days, gold and silver have been moving to higher prices. During this time, silver has consistently maintained a greater percentage daily gain than gold. A direct result of these movements can be seen in the recent convergence of the ratio which now sits roughly at 74. If both gold and silver continue to move to higher ground, we can expect the gold-silver ratio to continue to contract.

Old Concerns Resurface as New Concerns Emerge

The recent price advance in both gold and silver can be partially attributed to a weak U.S. dollar, which has traded lower for five of the last six trading days. It also seems as if both gold and silver pricing have been factored into the high probability of an interest rate hike by the Federal Reserve next month.

Meanwhile, North Korea has once again emerged as a global concern with this weekend’s missile test landing in the sea, a mere 500 miles off the Russian shores.

In addition, both gold and silver pricing got a boost from the regional U.S. manufacturing measure, which came in weaker than expected. As reported in MarketWatch, “A gauge of New York-area manufacturing slumped back into negative territory in May for the first time since Donald Trump was elected president, according to data released Monday. The Empire State manufacturing survey fell to negative 1 in May from positive 5.2 in April and far below the 16.4 reading in March, the New York Fed said.”

Just as the recent price decline in both gold and silver were direct results of a multitude of factors coming together, this most recent price advance is also a direct consequence of a host of outside factors occurring simultaneously. Should these factors continue, so should the recent price advances in both gold and silver.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer