Is Silver Decoupling from Gold?

Silver not only plunged below $30 and its 2021 high – it also closed there.

In other words, the market confirmed what I wrote in yesterday’s analysis.

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Silver likely topped in a similar manner as it did in 2011, however, if the stock market slides this time, the fall in silver prices could be much bigger, and the same goes for mining stocks.

Let’s stay with silver for a few more moments.

I just received the following question:

PR, Please comment. Silver has not had a strong correlation with Golds movement for a considerable portion of 2024. Will we see a Silver Gold direct correlation become stronger through this downward period as well as into the correction phase after downward phase. Silver has had a stronger correlation to the USD for a great portion of 2024 than Gold.

Let’s check.

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Here’s gold’s performance compared to what we saw in the correlation between gold and silver.

There are two things that we can notice in the lower part of the chart:

  1. The correlation between gold and silver was close to 1 for most of the year, and there were local periods when this was not the case.
  2. The movement in the correlation between gold and silver in 2024 was pretty much typical – more or less in tune with what we saw in the previous years.

This means that there’s no reason to be concerned about silver “breaking away” from gold – at least not based on the correlation data. It also suggests that things will get back to normal, just as they did in the previous cases. “Normal” here means that both metals will likely move in the same direction with a high correlation between them.

I’d like to add that the ratio between silver and gold and its behavior is often more useful than the correlation analysis.

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In the vast majority of cases, spikes in the silver to gold ratio as well as sharp rallies in the rate of change and RSI indicators meant tops in silver as well as in gold. This was slightly more reliable in the case of silver, but it was very useful also for gold.

So, silver’s recent outperformance, breakout to new highs and yesterday’s invalidation paint a bearish picture also for gold and miners, not just for silver.

Thank you for reading today's free analysis.

Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief