Precious Metals Analysis: October 12, 2016

Gold/Silver Ratio

As MarcoView has been implying for nearly 12-months, additional tightening would only be seen as “saving face,” essentially as a bid to remain credible – if that’s even possible.

Most notable, the minutes provided supporting evidence to this:

Several participants expressed concern that continuing to delay an increase in the target range implied a further divergence from policy benchmarks based on the committee’s past behavior or risked eroding its credibility”

The dollar is overextending near-term with a z-score of 2.11, down from 2.70. Additionally, the daily RSI is above 75. We feel that a DXY at 98/99 will make it extremely hard for the Fed to hike while maintaining its current inflation outlook.

#dollar hits 97.21 • resistance may be found near 97.60.

Again at 98/99 essentially takes away any chance of hike. #fed won't risk +100

— Christopher Lemieux (@Lemieux_26) October 11, 2016

The gold-silver ratio is showing a negative divergence from price action.

We believe that this will bode well for silver, which has been down nine percent in October alone.