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NFTRH; Beneath the Surface of the Precious Metals

As we’ve reviewed already, the Silver/Gold ratio gave a negative signal last week and it has not alleviated it this week so far. This is within the larger context of a long-term downtrend.

But here are some mitigating things going on below the surface that would ask us to control our bearish impulses (which in my opinion we should be doing anyway, since the time to be aggressively cautious and/or take profits was in late summer).

The silver miner ETF (SIL) vs. silver (SLV) has been firm for a month now. That is some strange correction signaling if you’re a bear looking for max pain. It has been earnings season and logically, the miners are reporting for the fundamentally favorable July-September period.

HUI/Gold (GLD) ratio has been firm over the last month as well.

Curiously enough, as silver has weakened vs. gold, silver stocks (SIL) have remained firm vs. gold stocks (HUI).

What to make of it? There is definitely a quarterly reporting input here. It could be funds positioning due to quarterly performance in the larger silver miners. Same could hold true for the gold miners.

The out performance of silver miners to gold miners is not enough to make me even come close to disregarding the silver/gold ratio’s negative message until it gets fixed; especially since the major trend on the chart of Ag/Au miners is still down. But I want to accurately report what is going on beneath the surface of the sector and what I see is a potential negative macro message by the silver/gold ratio mitigated within the precious metals by the miners vs. the metals.

As the precious metals correction grinds on it has the feel of a situation that could be a positive play if and when the broad markets finally take a correction. So say some of the mechanics in play beneath the surface.