Gold Surges to 7 Year Highs
Monday the big rally in gold continued push gold to seven-year highs before giving back half of its earlier gains. Silver continues to lag gold although also rallying the ration between the two is rising towards 90-1. The Gold/Silver ratio suggests a sell off in gold or a rally in silver is near.
Gold is in a bullish pattern and certainly should continue higher, however the rate of change has been too extreme. Gold should sell off 3-5% before it resumes the rally. Silver is once again at a key level, it will breakout to the upside or fail.
We are long both at these levels but expect a pullback in gold and a breakout in silver. The gold/silver ratio should narrow which can be accomplished by a sell off in gold and a rally in silver. Whether silver rallies or stays flat gold should pullback to the 1530-1540 level before making another rally attempt.