Gold prices fell to a near-three-week low on Monday amid sharp exchange traded fund outflows, continuing to erode mild gains posted in the first quarter of 2014. For those with an eye on silver the erosion of gold's recent gains should come as no surprise.
Comex silver has led gold prices since 2011 and it's not about to give up that leadership role. The lag between silver and gold prices has been reduced but silver continues to lead price developments. Looking at silver gives traders a leading advantage when it comes to anticipating the behavior of gold.
I offer no explanation as to why this relationship exists. What is more important is the trading advantage conferred by the relationship.
The peak price in Silver in April 2011 appeared before the peak in Gold in September 2011. The collapse following these price peaks showed the same behavior for silver and gold. Traders who followed silver had clear warning of how gold would behave once the peak price was established.