It’s nothing we have not been expecting for some time now, but the Silver/Gold ratio (SGR) is bonking its head right into the target zone today. Personally, I am a little nervous because gains are coming from all around and it seems too easy, which of course is how things would feel for an extended period if the SGR is able to break through here and go bullish.
Options include a continued pop to the SMA 200, an extended break above as the CDNX/TSX ratio did, a pullback, or a termination to the reflation rally. Unfortunately, I don’t have a clue as to which option will dominate going forward. But what we can say is that the all-important SGR is at a gateway to either an accelerating inflation trade or a failure of same. The US dollar, which is threatening a breakdown, is likely to go in the opposite direction of this indicator.