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Silver is the Tip of the Spear

The precious metals conjure much emotion in many people compared to commodities and other more down and dirty investments. There is a lot of enthusiastic noise around silver, especially.. That noise is backed by:

• Silver’s precious metal character
• Silver’s increasing use in modern industry (with due note that some industries are now employing alternatives due to the big rise in the silver price)
• Above ground supply is not meeting demand, as silver is largely mined as a by-product of other metals mining
• The long-standing theories that JPM and other nefarious forces have for decades conspired to hold the silver price down amid manipulation in the paper/digital markets
• The Silver/Gold ratio was at an epic low, hence silver was undervalued

I have long taken issue with that last point. Much like I took issue with the same complaining by gold bugs about the HUI/Gold ratio, implying gold miners were undervalued simply because the miners index was beaten down in relation to their product.

There were very valid reasons for poor relative performance by the miners, as I belabored from 2012 to 2024. The macro was generally aligned against the gold mining industry (as the powers that be had license from the bond market to create cyclical inflation to boost the economy almost at will), and no matter how gold bugs may have clicked the heels of their ruby slippers, their wishes were not going to come true.

It is the same here. Silver is not gold. It’s as simple as that. But the spike in the Silver/Gold ratio is reflective of a new era. One in which the 2022 upward yield rebellion in the bond market means that inflation is more intense in the new macro, and less conducive for inflating policymakers to simply create positive (though inflationary) economic cycles at will.

Silver is the tip of a spear that includes gold, now taking a back seat acting in its more muted “inflation protection” utility, along with its monetary/currency debasement and disaster utilities. And let’s not forget its counter-cyclical utility. Gold, in its current state above $4500/oz. could also be looking ahead to an economic downturn and Stagflation. Silver especially, appears to indicate the Stag.

In other words, if the economy that is boosting stock markets at all-time highs, copper, PGMs, Rare Earths, uranium, and now nickel and lithium in the wake of silver, is so healthy, why is gold, the counter-cyclical asset that has been traditionally thought of as money, also so elevated?

Gold led the whole process, as it usually does. Only this time, in the new macro, it was a big time breakout. Gold busted the door down and silver and an increasing host of commodities came through. The indication is that something is wrong, and something is very different than it was pre-2022.

While I believe the current leg of this new macro phase, featuring several spiking commodity prices in silver’s wake, will be interrupted, it is obvious we are not in Kansas anymore, and gold bugs don’t need ruby slippers to benefit.

Silver, in this new inflation-saturated macro could well resume leadership after whatever correction may be ahead. It is the tip of the spear thus far where the effects on asset prices in the new macro are concerned.

About the Anticipated Correction in Silver

I took some puts on SLV last week in my now private trading (gambling) account. Twice I resisted taking large percentage profits on the puts. I am being greedy. The puts are dated to mid-late March. I have visions of a major downward spike in silver ramping a massive gain in those puts.

Now back to reality, a trading account should trade! Twice I failed to sell a sizeable profit and buy back the next day. A guy with a trading account who doesn’t trade! Awesome. The original intent was to hold for a bigger crack in the silver price. That is still the plan. The plan includes the potential for disappointment.

The point is, you can proclaim a view on a market, take action on it and then wait forever and a day before the market does what you think it will. If it even does what you think it will. Hence the old saw, “markets can remain irrational longer than you can remain solvent”.

This trade is far from an insolvency maker. That’s why it is segregated in a small account where it cannot infect my portfolios. It’s a gamble based on historical outcomes. Except that, per the above, it’s a new macro. So there is an element here of the untested. As such, I still hold a bunch of gold and gold/silver stocks.

The tip of the spear may have just taken a little hiccup last week. But with a second day in the red (2 red days in a row have only happened once previously on the major rally leg and not at all after a hard up-cycle) I would think a test of the EMA 10 (green dotted) or EMA 20 (orange dotted) could be in order. Maybe?

That short-term micromanagement aside, silver is obviously stretch further than it ever gets above the 50 day average (blue). That does not mean it will stop. It means that it is being propelled with extreme force by market momentum. This alone could eat my puts and spit them out with ease.

As a final note where silver and the SLV puts are concerned, I have some of the real stuff. Unlike gold, I did not have enough of it (I released most of it back in 2011) to make much note of. Well, the price spike has at least made my little holding less little. So the puts could also be seen as hedging that over the next two months (assuming I hold them that long).

On the daily chart there is a negative RSI divergence at last week’s high. Will that play out in negative price action or will a momentum-fueled market simply see it as “oh look, daily RSI is less overbought, let’s party!”

Answers to come soon. Sentiment-wise, a condition is in place for a coming top. The public could not be more enthusiastic about silver than it is now.

Precious Metals & Commodities

The point of the above is valuable precious/industrial metal or not, silver is overbought. Gold is also sporting a negative divergence and is much less overbought by proximity to its 50 day average. This is a much more normal chart, and it is set up for the usual outcome, should silver top into a correction.

That outcome would be out-performance to silver and other spiking commodities, even if the nominal gold price also comes under pressure. Gold is the monetary stability anchor in a macro gone wild.

Meanwhile, GDX is well and bullish, but with a negative divergence of its own. This divergence actually looks more like one with some potential to fuel additional upside, having reset the sector from very overbought. There is a fat nearby gap at 96.98. That will likely fill if silver takes additional short-term downside.

“New” macro leverage (especially w/ respect to the Gold/Oil ratio) is still driving the miners higher vs. gold. This is the way it should be when leverage is working for, as opposed to against, a sector. All those years of bugs complaining about the miners’ lost leverage to gold… well guys, the leverage was there. But it was negative leverage!

Nominal HUI is motoring upward and quite stretched above its 50 day moving average. HUI/SPX has broken into the new macro as, obviously, has Gold/SPX.

I do, however, have a suspicion that the stock market may have a bullish trick up its sleeve. It is more in the realm of gut feel than anything else. But its under-performance has been notable while its trends remain up. More on that shortly.

Here we see the leader, gold. It took out the “bull gateway” (1378) in 2019, tested the all-time high in 2020, made a multi-year correction and then led the current phase, showing silver the way. The Silver/Gold ratio and the TSX-V index caught on, while the CRB commodity index continues to languish under pressure of Oil/Gas and some aspects of Agriculture.

This chart shows the bullish precious metals, platinum and palladium catching on in silver’s wake (which they tend to do), the TSX-V index on it’s breakout, and notably, the TSX-V/TSX ratio not nearly keeping up on the big picture. Not yet. If that bottom panel were to trend up over the long-term in a conducive macro, the gains in the more speculative (but non-scammy) mineral exploration stocks could be breathtaking. As it is, nominal TSX-V is at least very constructive on the big picture.

Here is an interesting chart of copper (red) and nickel. Ni had been a gross under-performer to Cu and many other commodities/markets since 2023. “What’s wrong with Nickel?!?” one might have thought. It’s a battery metal, after all. A somewhat critical material.

What was wrong with Ni was simply the price distortion that drove it parabolic during and coming out of the pandemic and into the post-pandemic inflation phase. Meanwhile, Cu is being celebrated for its new all-time highs.

This chart implies that the excess has finally been bled out of Ni as the two key metals had been fairly well in unison until the 2021 price distortion. A further implication is that if you like Cu, you also may like Ni at least as much.

Functionally, as I held nickel prospect TLOFF (TLO.TO) to 300+% gains last year I kept thinking “but the nickel price sucks”. Well, I no longer think that, and also happen to hold TLO again (hat tip to geologist, MC).

Finally, the journey taken by nickel into, through and after its parabolic percentage spike and blow off might be a guide for silver bugs to at least consider. It’s kind of how markets eventually roll after price eruptions happen.

As far as commodities go, my main focus is currently on these metals (profit taken on TECK, TLOFF and ADBRF held), along with Rare Earths (MP, IDR held, LYSDY, UUUU and ARAAF on watch), Uranium (SRUUF held, profits taken on CCJ and UUUU, both on watch along with UEC) and with the recent rise in Li prices, Lithium as well (SLI & LAC on watch) and PGM (profit taken on CLRMF, and way too early on SPPP).

There are more out there, and there is time if this new macro is what I think it is. There will also be opportunities for buying over the longer-term.

Stock Markets

And while everybody’s watching silver and certain commodity bottle rockets, this pig is still crawling along above initial support. As implied earlier, it is almost too quiet. If it breaks down, fine. We can begin some bear festivities. But the seasonal runs to mid-February and SPX is not overbought. The 7400 measurement is still theoretically in play.

What’s more, despite charts like the Gold/SPX ratio (much higher to go, long-term) shown in Friday’s public article, the incredibly bearish SPX/Gold ratio (monthly chart) is at a point that could find some short-term support, perhaps for a bounce. It’s worth consideration, at a minimum, until the stock market breaks down in gold units.

And until Tech breaks down in its leadership to SPX, I am not prepared to make such an assumption. If you have not noticed, small caps (IWM) are making new highs this month along with the front end of this leadership chain, the Semiconductor index. I have a hunch Tech is going to get a hold of itself and rally, perhaps retaking some leadership.

Bottom line: We do not have much in the way of bear signals in US market internals. Even considering the recent decline in Growth/Value and constructive state of Healthcare/Broad, etc. (please refer to the Indicator Charts page as frequently as you’d like to keep tabs on these and other internal indications).

Globally, it continues not to be just a US thing, as global liquidity spigots are open during these times of trade and geopolitical strife. It’s going to turn out inflationary, globally as well as in the US, over the long run.

Indeed, ACWX/SPY ratio continues bias toward global on the intermediate-term.

Recent star performers include Emerging Markets, Europe, Japan and Canada while others like India and LatAm are more muted. Overall, however, the globe is bullish and recently, more bullish than the US.

US Market Sentiment

Stock prices are firming in general as investors gather themselves. This fits with the speculation above about the prospect of a rally well into February.

Breadth is also hinting to turn back up. That would also be a sign of gathering bullish prospects.

VIX has been rising with the recent market chop. But is not only below its 50 day average, but also its SMA 200. It has done little other than to perhaps fuel a coming surge in the stock market that we will watch for its potential to be a final surge prior to a significant correction.

Junk bond spreads are wildly over-bullish/speculative and are in a position to bring on the next correction or bear market. But they are a lousy timer. In the short-term, this reading can work with a market rally as speculated above.

Smart/Dumb money indicators are contrary bearish for US stocks. Risk is elevated short-term, and quite concerning medium-term. Hello gold!

Individual investors (AAII) are at a new high in bullishness for the cycle. This is a contrary bearish sign.

Investment managers (NAAIM) also remain briskly over-bullish at 96%.

Currencies

It is no accident that this segment has been de-emphasized in recent years. All paper currencies, including and even especially USD, are shit. That is because they denominate hopelessly indebted societies that only know one trick, inflation, for running their economies.

USD could continue to rally if liquidity becomes a problem (and the Gold/Silver ratio bottoms and rises). It has the potential to complete a base if it holds above the moving averages.

Euro could be rolling over, Canada dollar (commodity currency) is neutral, Aussie (commodity currency) is trending up and the Yen, which would theoretically benefit if Japan yields eventually trigger a Carry Trade short-cover, is still drilling downward.

I settled on Bitcoin (dividend) income generator BTCI over BITO. This is a diversifier in the portfolios that I think can rally with the broad markets if the anticipated rally is ahead. BTCI is testing its short-term breakout support.

Portfolios

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

Taxable account largely removed from weekly reports because it is extra time consuming work (especially when adding notes to the right column), and it is not a representative “investment” account (it’s as much a cash/bond oriented savings account as a stock investment account).

Here is a snapshot of holdings in order of position size, aside from large short-term Treasury and cash holdings.

Roth IRA (non-taxable, no contributions)

The chart is motoring along since the 2023 withdrawal of funds that caused it to drop a bit, and again since volatility in the first half of 2025. Motoring along is nice, but you will notice it looks nothing like silver’s vertical upshot. That is by design.

Cash is 34% and short-term Treasury bonds are 35%. The portfolio is roughly even in its holdings of cash, bonds and equities. Currently no bear positions. Preferred Precious Metals stocks are primary, Commodity/Resources holdings are secondary, along with Healthcare diversity and yes, Tech, which I have a hunch about. Energy is still hanging in there as well, although the two Gas stocks are on notice. I might rather just increase XLE and be done with those two trouble makers. The Bitcoin thing is an interesting diversification and income generator.

Cash & income-generating Treasury bonds 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.