More on the Gold/Silver Ratio

Mark would like me to tone down the gold/silver ratio talk, most recently displayed for your viewing agony this morning (actually, it was the silver/gold ratio but who’s counting?). Oh and it’s NFTRH, not Biiwii.

Gary, give it a break with the gold/silver ratio one time

Now, I appreciate all the nice things you had to say about my work over the years and just because you’ve decided that silver sucks in 2020 doesn’t mean I am going to change what I do. If I am headed down the path of suck in 2020, so be it. You were bullish on copper in 2019, eh? Well who was bearish on copper (with the downside targets and all), eh? Anyway, I am not yet bullish on silver, obviously. But because of that its importance as an indicator is all the more at the forefront.

Dude, you look at rocks and numbers. I look at indicators and charts. Bullish silver would mean every inflationist, silver bug lunatic on the planet loudly touting the gold stock bull. No thanks. It was NFTRH’s well defined environment for gold stocks that brought on the bull. Not the inflationists and silver bugs.

So anyway, it’s not a post about one very popular blogger critiquing another less popular blogger for using one of his most important indicators. It’s a post about the Gold/Silver ratio (GSR). The daily chart, which logically ran concurrent with the market stresses in March has consolidated nicely and recently formed a pattern above the 50 day average and nested at the EMA 20. If it turns up anew there will be stress on many areas of the macro.

gold silver ratio

We’ve been using this chart to show the correlation with the US dollar, itself a taker of liquidity during difficult times. Lately the daily USD is going lame while the GSR forms its pattern as noted above. Somebody is likely to get with the other before long.

gold silver ratio

We’ve also used the weekly chart to show an important breakout and game changer for the macro markets. And it’s not just gold/silver, it’s gold/copper, gold/oil, gold/CRB and on and on. Again, it’s the preferred backdrop for buying the gold sector. Sorry, but that’s what it is Mark. I presume you’re not complaining about said backdrop.

Finally, just because it is so striking, here is the long-term breakout in the GSR. For fun, the XAU index (HUI’s history is not long enough) is overlaid showing that not all times that the GSR rose did gold (and silver) stocks get croaked. There was positive correlation to the downside in the late 90s, positive correlation to the upside during the 2001-2003 precious metals launch phase (before silver and commodities really got going, and a period that I see as having a lot of similarities to now) and for old timers who could stand the periodic volatility, a decent correlation in the 80s.

And what’s this? Gold stocks are most recently not being impaired in 2020 by rising Gold/Silver (again, with the requisite volatility along for the ride). That just means that it is so far one of those rare occasions that the damn gold stocks actually follow their top down fundamentals (a rising gold/silver ratio occurs under the same pressures that elevate gold mining sector and macro funda) instead of getting puked by the inflationist gold (and silver) bugs.

gold silver ratio

So there you go Mark. Another Gold/Silver ratio post. I think it has some value. You can think whatever you want.

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