The ratio between the prices of gold and silver has been steadily rising for the past year. After reaching a low of 62.07 on Feb. 1, 2021, it has since recovered and now sits just below 80. That 29% gain in 12 months might be enough for some to bet on gold versus silver, but we need more evidence.
Such as looking at the situation through the prism of the Elliott Wave principle. The 4-hour chart below visualizes XAU/XAG ‘s progress over the past year. Judging by it, gold looks vulnerable in the short-term.
Gold ‘s surge against silver is a textbook five-wave impulse. The pattern is labeled 1-2-3-4-5, where three lower degrees of the trend are visible within wave 3, as well. The only missing piece of the puzzle is a new high in wave 5. Instead of celebrating it, though, the bulls should prepare for a bearish reversal.
According to the theory, a three-wave correction follows every impulse. Corrections usually erase the entire fifth wave. A drop to the support of wave 4 near 74.00 makes sense, before Gold ‘s uptrend against silver can resume.