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Silver-led Party Likely Over For Now

Note: the premise below may well be an interim signal (i.e. not nearly a long-term issue). Please consider that the Silver/Gold ratio could well break trend higher in an inflationary macro.

The precious metals and other markets recovered in-day on Friday to slight losses or minor gains. On the surface of things that was positive. The market could not sustain the negativity that the day started with. The bulls took over.

But as long as the Silver/Gold ratio (SGR) is in a double top posture beneath the nominal surface view of things, I am calling “party over” in the precious metals and most other areas that were particularly pro-SGR, anti-USD and pro-TSX-V/TSX ratio since the spring.

“Calling”? There was a high probability that “if” April saw an extreme low in the SGR “then” silver would lead the precious metals and many other markets higher. Conversely, “if” this is a double top in the SGR “then” it would signify an end point to the SGR’s rally within a still intact long-term downtrend.

That would further imply that the precious metals correction is still on, along with most other markets that rose after the SGR gave its bull signal in the spring. Very simply, we used the chart above to project the rally and we are using the chart below to project a decline of at least moderate degree, IF this double top condition holds.

Could I be wrong? Sure, the SGR could turn back up and negate the double top. Assuming it continues to decline, could this fail to play out logically with respect to gold stocks? Could gold stocks resume rising despite a declining SGR? Yes.

Recall that during 2023 into 2025, as the SGR was declining (Gold/Silver ratio rising) the gold stocks were most often positively correlated with a rising GSR. The first part of the 2025 mega rally featured this positive correlation, before silver took over and led the hysterical and more speculative phase (FOMOs, anyone?). Would a resumed positive correlation between gold stocks and the GSR be a favored outcome in the near-term? No.

Let’s again consider the chart of HUI and the GSR below.

The green shaded zones were fundamentally righteous times when gold stocks rose with their proper disinflationary, counter-cyclical fundamentals, as gold led silver and most other asset markets. But if you look closely at the chart’s time span from 2001 you will see that the vast majority of time HUI has risen with a declining GSR and counterintuitively, declined with a rising GSR.

Gold stock traders tend to get much more frothed up when silver is performing better than gold. Which means that they tend to like it when inflationary indications are upon the macro and the economy is holding up (silver is more inflation sensitive and economically cyclical than gold).

In other words, many gold bugs trade or invest for the wrong fundamental reason: cyclical inflation. Historically, an eventual price is to be paid for that wrong-headedness (2004-2005 correction, 2006-2007 correction, 2008 crash, 2012-2016 bear market and correction legs 1 & 2 of the current bull market).

It is in those declines – as fundamentals get positively juiced as indicated by a rising GSR – that the best buying opportunities occur. The most recent example coming in 2024.

So yes, per the precedents of 2001-2003 and 2023-2025 gold stocks could just keep going up if the GSR bottoms here and turns up. But that is not the probability implied by history. So I would ask you to consider how many unhealthy, uneducated, yet highly promoted MOMOs and FOMOs may have been drawn into the investor base by silver’s post-April leadership.

If the double top in the SGR is real, the odds are that the precious metals correction and corrections in other areas will extend.

Spanner In the Analysis Above?

The main caveat I would add to the analysis above is that as I’ve harped upon since 2022, we are in a new and inflationary macro. But that this inflation, when it resumes, will be economically corrosive due to the rebellion in the bond market (against which Trump wants to rig 50 year bonds, a macro parlor trick he and Bessent may try to cook up) that became evident in 2022.

The global financial macro world is very different now than pre-2022.

So I want to be careful about dismissing silver as readily as I might have pre-2022. Then my view of always hot to trot silver bugs was of naivete at best, promotional derangement at worst. Today, if the macro has indeed flipped inflationary on the big picture, who’s to say silver might not aim for 100/oz. and beyond. I see it as quite doable, eventually.

But in the here and now, we use sensitive indicators for a reason. That reason is to be on the right side of interim market moves. If the SGR somehow negates the double top and makes new highs a trend change to up would be likely and man, we’re gonna…

But that is not the signal right now. I cannot predict what will happen, but I can and will do my best to display for us the proper indications that imply probabilities. If the SGR double tops as its chart currently implies, and if the Gold/Silver ratio then rises strongly and tows USD along with it, we’ll have an at least interim market liquidity problem prior to the next inflationary phase.

If that were to come about, gold stocks would be a clear ‘buy’ at some point during the deflation-scare that would precede the next big inflation problem.

USD & Bitcoin

So what of Uncle Buck? The Trump administration wants a weak USD as part of an effort to inflate away some of the $36+ Trillion in national (public) debt. The world is de-dollarizing as best it can. But you just watch how quickly the world buys US dollars if it is forced into an interim asset liquidation.

Meanwhile, the digital savior, Bitcoin is having trouble of its own having cracked support, now resistance just below the 50 and 200 day moving averages. This is not a broken chart by the way. Indeed, a fundamental BTC bull would be looking to buy at a higher low to the April 7th low of 74, 434.

Since I view Bitcoin as more speculation than currency and not at all as an investment, I will be interested to see if it makes that higher low, prior to what could be a heck of an upside trade. That would also play well with a view that a year-end speculative stock market party could still be in the offing. In short, a slingshot needs to be pulled back in order to attain the tension needed for launch. That may be what BTC and other speculative markets are now doing; increasing tension amid an unbroken uptrend.

Personally, I am going to keep BITO on watch for a trade.

As for USD, as you can see it halted where it was supposed to halt, at the downtrending 200 day average and clear resistance. But it is also at a point where it could find support, if not lower at the 50 day average, which would still be a higher low to the previous low.

One possibility is that USD could bounce again, fail at or below resistance at 102 or 103 while other markets continue to correct, and then decline again as party season kicks in. Let’s remember here that the Silver/Gold ratio does not need to and probably will not decline to an extreme if the double top plays out.

Interlude: I am shoving a lot of information at you and this is an example of why I want to offer a new aspect of service – discounted for subscribers vs. the public rate – where we can meet individually and privately by Zoom or similar venue and simply talk. In written form the words pile up, hopefully making sense. In live form we can get down to the details of concepts like what is going on in today’s report, or talk about portfolio composition, stock TA, and otherwise tailor discussion directly to your needs as an individual.

Let’s take it week-to-week, as we did on the way up. The plan has been for an “interim” liquidity problem prior to the next inflationary kick save attempt. On a weekly basis we will keep an eye on the timing and intensity or lack thereof, of the play.

Recently, we introduced the prospect of an interim yield curve flattening (decline) prior to the next steepening (rise). But the 10/2 is still moving sideways. The nominal yields in the lower panels indicate that the current phase is disinflationary, as per our plan.

• If the curve steepens again out of this consolidation and yields continue downward, we could have a severe liquidity problem in markets, possibly negating Wayne, Garth and the year-end party.
• If the curve steepens again and yields start to rise markets could see a rotation to the “inflation trades”, which could well be indicated by resumed silver leadership over gold.
• If the curve flattens and yields continue to trend down, Goldilocks could be the main party-goer. I’d look to Tech, Bitcoin, and other more speculative ends of the macro.
• I don’t envision a scenario where the curve would flatten with nominal yields rising.

Week-to-week. The signals will come.

Commodities

With respect to the above, let’s keep in mind that commodity indexes/ETFs do not appear to be preparing for a large deflationary event. Instead, they appear to be poised for an inflationary outcome when the interim disinflationary situation clears.

Let’s refer back to the big picture monthly chart of the CRB index, which we have not reviewed in several months. Leg 1 up in 2020-2021 was similar to leg 1 up in 2002-2005. Both were upside moves that logically came after major inflationary operations by the Greenspan and Powell Feds, respectively. Each example then entered a corrective phase, with the current phase still in force.

In a new and inflationary macro, that is where the similarity may end. As CRB consolidates amid an interim disinflationary macro (with added noise injected by Trump’s tariff mayhem) I’d lay odds that the next upside in CRB will not be an ending upside shot into a deflationary crash (e.g. 2007-2008) but instead, a new bull phase that would be much more sustainable.

So as investors and traders, while we would see the leading gold stock sector as no longer unique, we would see a macro market setup that could offer much more profit opportunity beyond gold mining.

Current Market Strategy

I am going to stay away from regimented formatting in #889 and continue as the subject matter will take me. Where it takes me now is what I am seeing and how I am planning to deal with it.

U.S. Stock Market

We have on the one hand still intact internal indicators like the SOX > NDX > SPX leadership chain, intact index trends and an over-bearish (contrarian) sentiment backdrop favoring the bulls. On the other hand is a would-be negative internal indication as defensive Healthcare bounces hard vs. broad SPY/SPX.

However, the ratio is at a potential termination point. In other words, this bearish indicator has traveled along with recent bearish stock market activity. While a bear market could be starting here and now, I continue to favor the idea that recent bearishness is increasing the tension on a bullish year-end slingshot.

Linking to the opening segment, a pullback here could well coincide with post-corrective, new upside in the Silver/Gold ratio, if a pervasive year-end party is to play out. Again, week-to-week we will let the indications tell the story. Lot’s of moving parts, time frames, interim and dominant trends, and all.

I have some Tech stocks at the ready to buy/buy back should the party plan start to step forward. Meanwhile, SPX continues to look lame short-term, despite Friday’s mini recovery. It could rally from here, but it would be more likely to gain the tension needed by a further decline to around 6400, if not a real jolt and sentiment reset with a drop to the 200 day average and/or the pattern top, which does not seem likely in the year-end party time frame (unless some “event” spurs a crash).

I have mostly rotated out of riskier stocks and into Healthcare, and so far that is working well. But as per the in-week notes, that could soon stop working so well since XLV/SPY (above) is at a potential halt point. We shall see. Week-to-week, I say.

Sentiment is setting up for a contrarian buy.

Global Stock Markets

The next time USD dumps back into its cyclical bear market I will plan to increase global positions, assuming a year-end party situation as described above. Items like BABA, ASML, etc. have been previous go-to’s. A subscriber asked about a buy level on BABA, and so here is a chart showing the preferred low risk level at a test of the 200 day moving average now that it has already cracked the 50 day average.

Not surprisingly, the ACWX (World, ex-US)/SPY ratio has popped back to a positive stance with the pullback in USD. To review, ACWX/SPY tends to travel inverse to the US dollar. If USD gathers itself and rallies again, global stocks would be likely to under-perform U.S. stocks. If the opposite happens, it would favor global over U.S.

Nominally, ACWX is simply on a normal pullback, much like U.S. markets. It should be subject to the same dynamics as the U.S. market regarding a potential year-end party play.

More Detail on Commodities

• The star performers have been critical minerals amid the Trump admin’s focus on domestic supply chains. Those plays went vertical and have since tanked. It’s a much different market than 2023-2024 when we planned for a would-be bullish future for MP Materials. Now, in my opinion, it’s a play (as are most things Trump touches, IMO). The play could get a good snap back rally after the tank job. Items of interest include MP, LYSDY, IDR, PGE.V, TLO.TO, MMG.V, AIR.V, BTT.V, DBG.V and more.
• Platinum and Palladium (PGMs) can be included with the above. Adding SBSW to the list of items above. Also watching SLI and LAC in the Lithium patch. Each has come down nicely after previous hype.
• Keeping an eye on industrial metals, as the GYX/Gold ratio is at extreme lows. With silver’s potential to pull back in gold terms, I want to hold off for a bit. But miners and explorers of Copper, Nickel, etc. would do well if/as the macro swings inflationary again (as always, we watch Silver/Gold, eh?).
• I am still watching the Uranium sector. I let go of CCJ, which dropped a bit further than I would tolerate as I was going risk-off. But it is still intact and on watch. As are usual suspects UUUU, NXE and UEC.
• As noted long ago, I have little interest in the Agricultural space as it has bested me more often than not when I’ve traded it. It is the furthest commodity space from my areas of competence.

More Detail on Stocks

My watch list includes the likes of the over-valued AI stock ALAB, which has been a great swing trader. While I currently hold QCOM and MRLV, I’d have an eye on other Semis stocks as well, depending on how far some of them may decline to buying opportunities.

In Tech/”bull stocks”, I’ve got RDDT, ZS (on which I recently took profits), META, AMZN and a few others on watch. It’ll depend on individual charts and the prospect of the broad market stirring up a year-end party that leans “Goldilocks” or at least not too heavily inflationary, in which case I’d favor commodity related stocks.

More Detail on Precious Metals Miners

Rather than start shorting again, I decided to simply take some more profits. I’ve held onto several items, however. Frankly, I am in no hurry to add anything until/unless a year-end broad bull phase manifests and includes the precious metals.

Meanwhile, I am just as likely to short gold stocks to hedge as I am to buy additional items back. Taking a few more profits and simply holding whatever is left is also an option. But what works for me is yet to be decided (with my 8th and final week of treatments this week!!!), as the last 7 weeks have not been conducive to clear, uninterrupted concentration during trading days.

Meanwhile, gold stocks had a “best of all worlds” fundamental (Gold/RINF) and leadership (Silver/Gold) situation in play until the October highs. HUI is going the way of the Gold/RINF ratio as it should, and the SGR is pulling back too.

What I can tell you is that this chart expresses a no-brainer technical buy at around 55. But much like the stock market as noted above, it may not have the time to get that low within the year-end party time frame, barring some “event”.

Portfolio

Gold is long-term risk management & monetary value/stability in a balanced portfolio.

Discussion

I no longer include notes in the right side column of the portfolios. It’s mundane and a time suck, compared to simply writing my thoughts about positions as per the report above and in this segment. As per the analysis above, I am straddling along with increased Healthcare (more defensive) exposure, but am suspect that the XLV/SPY ratio will break through “this” time, in a big market-bearish signal.

Hence, I have two bullish views on hand, in the event of the ratio’s failure and renewed market rallies (we should also respect the less favored idea that a real bearish phase or bear market might have already begun).

1. A rotation to “inflation trades”, which would see commodity and resources stocks favored, likely along with precious metals and global markets. This could be indicated by a stabilizing and renewed rise by the currently declining Silver/Gold and TSX-V/TSX ratios. USD would resume weakening.
2. A more Goldilocks flavored trade, amid ongoing disinflationary signals and perhaps a firm USD, favoring US Tech, Semi and more speculative items.

Taxable Account

In order of position size. Profits taken, despite taxation. Here is what is left. I plan to increase positioning handily if buying opportunities arise and the year-end rally situation looks imminent. Ideally, I’d buy further correction and not worry about new taxes until 2026 reporting.

The taxable account carries high cash levels as long as cash and equivalents are paying out. This is considered a savings account of sorts, rather than a speculation or even investment vehicle. The goal is to speculate around the periphery. In another market phase (e.g. post-crash), the account may get much more in the game.

Trading Account

No positions.

Roth IRA (non-taxable, no contributions)

The year-to-date chart shows the level I do not want to violate. Hence, recent risk management. Ideally, I’d like to turn this consolidation into a platform for new upside (duh). The 3yr chart advises “do not give back an appreciable portion of longer-term gains!” (duh)

Cash and equivalents are a heavy 82.5%, not including the Euro short acting as hyper-cash (implied USD-bullish). I have taken massive profits on a couple positions in the 300% range. It’s an IRA. I had to do it. Now comes the question of whether that will turn out to be a good or a foolhardy idea. Because I’d like to bring back items like TLO.TO (TLOFF) and RIO.V (RIOFF), etc.

I held preferred precious metals positions, still hold some REE for a would-be rebound, and have plenty of items on watch, per the report above. Meanwhile, cash still pays some sort of income as do my short-term Treasury bonds. The Healthcare stuff is actually doing better than I’d anticipated and I am not in much of a hurry to sell just yet. Finally, as you can see, a couple Semi items are lurking in there (MRVL & QCOM). That is a little front run of the year-end rally theme.

Cash & income-generating Equivalents are at levels that are right for me and my real-world situation. Your situation is different. Cash will be adjusted as needed.

Refer to the In-Week Notes under the NFTRH Premium menu at nftrh.com for market talk and occasional trading info, if interested. Also, you can follow on X @NFTRHgt for notice of updates.

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Notes From the Rabbit Hole (NFTRH) is a weekly market report in which we provide analysis on financial markets.  We make every effort to provide accurate and high quality content, but this analysis ultimately represents our opinions and these opinions are provided without warranty or guarantee of any kind.  See full terms & conditions of service under the ‘About’ heading in the main menu.