via Bloomberg - Divergence In Gold, Silver Markets

A topic of discussion in futures trades is bound to become a major concern for precious metals investors, which is the gold/silver market divergence.

Partly responsible for this divergence is a massive volatility smile derivative which has basically cornered the financial interest in gold markets, while silver has been bearish since its peak price. Also for silver there is an overhang of supply, while the gold ETF supply overhang has washed out completely.

Banks are faced with settling the notional on a gold derivative contract which leverages the entire daily trade in gold prices and has caused a dump of gold into the markets. Dumping gold onto the markets allows the use of greater leverage in futures trades, so people in the futures market will be able to leverage their gold trades, meaning notably higher, more volatile prices.

Another looming factor for gold markets is incrementally declining short term rates on treasury bills, which can go nominal negative in the U.S. should major indeces in the markets finally reverse.

Bloomberg Video

A crossover of the 13-week EMA and the 34-week EMA appears to be a layup.

http://scharts.co/1kClfB6

-F6