Gold and silver often correlate with each other, but not always. We already showed what we think about the yellow metal.
Recommended reading: Gold to finish a 1-year-lasting pattern
So now is the time to examine its cousin – silver. In the beginning of June 2014 silver bottomed around 18.60 and has been in a strong uptrend ever since. Currently at 21.40, we can say it was a rally quite impressive. But no trend lasts forever. Let’s take a look at the 4-hour chart of silver.
The price action, visible on this chart, cannot be counted as an impulse, which means that it is some kind of a corrective pattern. More precisely, it looks like a simple zig-zag A-B-C, where wave B is a triangle. Triangles precede the final swing of the larger sequence. In this case it is wave C. Once it is finished, we will be expecting a strong reversal to the downside for silver. This bearish scenario is supported by the Relative Strength Index as well, which is showing us a bearish divergence that starts from wave 3 of A.
Recommended reading: Gold, 1100 visible in the long term
Having in mind our long term target of 1100 for gold and its general correlation with silver, we should not be surprised by prices around 16.00… maybe even lower.
