Wednesday, June 1, 2011

The terrifying correction in silver . . .

. . .doesn't seem so bad.


The last month's activity (yellow curve) still shows we are a long way from the breakout of a Lyapunov-stable area for the gold-silver ratio that had held for the last ten years. It will take a lot more technical damage to bring us back to the former area of stability.

In dynamic systems, once you cross the separatrix, it is difficult to put the system back into the same state. It happened in 1998 after the Warren Buffet affair, but there may have been furious behind-the-scenes activity at that time. For this breakout to fail, the gold-silver ratio will have to return to approximately 50. So keep heart.

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