After months in the gutter, the poor man’s gold is finally “movin’ on up.” Silver popped nicely, rallying nearly 7.5 % from low to high over the past two weeks, beating gold’s 4.8% gain. No longer getting solidly trounced by its richer cousin, silver is striking back. In last week’s blog we discussed just how cheap silver (and platinum) were vis-à-vis gold. While certainly less so now (see chart below), silver remains extremely undervalued relative to gold.
The gold / silver ratio has dropped a little more than 6 full points in the past week, falling from a high just north of 93 ounces of silver to purchase one ounce of gold, to just under 87. Could this be the big gold/silver reset we’ve been expecting? It may be too early to tell, but we’ll take the 6-day pop in silver — whatever the cause.
Data Source: FutureSource
In last week’s blog we identified $16.20 per ounce as a key level for silver. That level was taken out on Friday. Monday’s close of $16.41 – roughly 20 cents higher than Friday – puts our $17.50 near-term objective in play. However, it could take a bit of work to get there. Silver’s slow decline was marked by multiple periods of consolidation. Each of these consolidations established key resistance levels. Silver needs rally above all of them before we can consider it explosive again. Rallies Friday and Monday were a good start.
Given the multiple levels of resistance currently above the market, RMB Group trading customers who took our suggestion in our July 2nd blog to by December $16.00 / $17.00 or December $16.50 / $17.50 bull call spreads in the 5,000-ounce COMEX silver options may want to consider exiting half of your positions and taking your original risk off the table. The spreads settled Monday for $2,090 and $1,565 respectively. Continue to hold the balance for a potential move to our first objective of $17.50.
Data Source: Reuters
Please be advised that you need a futures account to trade the markets in this post. The RMB Group has been helping its clientele trade futures and options since 1991 and are very familiar with all kinds of option strategies. Call us toll-free at 800-345-7026 or 312-373-4970 (direct) for more information and/or to open a trading account. Or visit our website at www.rmbgroup.com.
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The RMB Group
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