Gold to Follow Silver Higher? Breakout Imminent

With Silver already having broken out, it seems likely that Gold will soon join the party. Commercial hedger positioning is at almost historic extremes suggesting a rally is in the cards. Last week Gold futures attempted to break below the bull flag but reversed the very next day. 1,215 now marks the confluence of the top of the bull flag and the downtrend off the April high. A move above this level would be viewed as a very bullish event and would confirm the low also seen in Silver.

Also of significant importance is the extreme level of the Gold/Silver ratio which has been reversing dramatically over the past couple of weeks. Silver outperforming gold is characteristic of a precious metals bull market. The below chart shows this relationship. The red line is the Gold/Silver ratio which looks to be failing around historic highs. The blue line is the price of Silver inverted. The reversal of this ratio from this extreme suggests we are looking at a significant low in the precious metals with a strong rally to follow. This could set up some significant long opportunities in the miners.

Watch that 1,215 level for confirmation. We could see it pretty soon.