This morning the December gold/silver (x7,000/oz.) spread rallied as high as +$7,095. This fulfilled the hypothetical order criteria to short the spread at +$7k (premium gold). Initially, we are going to risk this position to a two-consecutive day close above +$9k.
Although the spread has been stuck in a trading range for the last half a year, don’t forget that the Q4 peak is the third-highest price of the last four decades. At some point, the spread should break out of the downside of this range.
Once the December gold/silver (x7,000/oz.) spread can start a well-defined downtrend, we will look for setups to add to the short position. After peaking at such lofty heights and going into a multi-month consolidation phase, we would not be surprised to see a one or two-year bear market emerge that takes the spread all the way back down to -$20k (premium silver). We expect to take full advantage of it.