Silver/Gold and Gold/Silver ratios are among our most important indicators. Silver has more pro-inflation, pro-cyclical characteristics and is a more commodity-like commodity than gold, which has more monetary characteristics. The Silver/Gold ratio indicates an inflationary backdrop when it is rising along with other indicators of inflation.
Here is the current picture from the live futures charts.
The daily chart continues to hold the up-trending 50 day average. That is fine. But the Bollinger Band mid point, the 20 day moving average is providing resistance. The picture is fine because the SMA 50 is the important one. But if the the BB mid-line holds and SGR loses the SMA 50 it would look like a double top will have been in place, at least short-term.
Daily RSI and MACD are each positive, but trending down on the short-term.
The weekly chart is still a-okay in breakout mode but again, there is the double top potential. RSI and MACD are obviously positive here too, but have a negative divergence.
Bottom Line
The Silver/Gold ratio, which is important to commodities and the greater reflation trades, not to mention precious metals, is intact above the daily SMA 50. If it were to lose that level it would be the first sign that the broad markets could encounter some liquidity issues. If it holds, we’d generally remain on the post-March 2020 themes.
If the Continuum (30yr yield monthly chart) is on point, we are only looking for a pause in the reflation, a pause which is already in progress. That could just imply further weakness in the SGR but not a breakdown. If it breaks down however, the minor correction to the reflate-ables in play now could become more serious.
