The Correction Zone for precious metals has been expected to run until late in the month. The signal for the turn down was the RSI on the silver/gold ratio getting to 86 in November. The next signal was the Upside Exhaustion for Silver Wheaton, which anticipated the high for silver.
The gold/silver ratio has increased from 46.1 three weeks ago to 48.9 today. Rising through 50 will set the uptrend, which would signal the advent of the next phase of liquidity concerns.
Our comment about "Too many analysts have been drinking the silver Kool-Aid" would be enhanced by a leading silver analyst explaining that there is no fundamental reason for the drop in silver prices relative to gold.
Out of this period of correction, gold's real price will likely resume its uptrend, which has been one of the features of a post-bubble contraction.
With the first business recovery our Gold/Commodities Index declined from 519 reached with the panic that ended in March 2009. At 340 lately, this representative of gold's real price and mining profitability should soon begin a material advance.
Problem is that gold shares will decline with a significant decline in the NYSE. Over the longer term this sector will accomplish outstanding gains while most orthodox stocks will net out significant losses.
(Continued on next post)