That's all fine and dandy, but it's not the reason for today's post. What I really wanted to show is how momentum is deteriorating to the point that we might soon experience the first major MACD cross since 2011. I've circled each instance in the last 10 years where the GSR MACD made a cross - either positive or negative. Each time this happened, it marked the beginning of a new long-term trend as each subsequent move lasted at least two years.
If and when it does cross to the downside, then the odds favor silver to outperform gold, dragging the GSR down from current levels. How low might it go?
Why do I think this? Because from a fundamental standpoint, silver has been trading below the cost of production for almost a year now. Steve St. Angelo of the SRSrocco Report, put out a nice report a few weeks ago detailing the primary silver miner's cumulative operating results for the year ended 2014. Not surprisingly, the group of 12 miners he analyzed reported a combined net loss of $1.95 billion for the year. That equates to a break-even per ounce silver price of $19.24 Their break-even in 2013 was $24.05/oz so you can see just how aggressively silver miners have been cutting costs to keep up with the drop in silver.
To address those of you who argue that more than half of worldwide silver supply comes from base metal mining, I'd like to present the following chart of DBC, the commodities tracking fund:
Given the technical and fundamental reasons laid out above, I believe the GSR will shortly begin a prolonged descent, driven by an increase in silver prices that far outpace any increases in the price of gold.