Silver/Gold Ratio Trades On The Cusp

Summary

The Silver/Gold ratio is signaling strong potential for a resumption in the short-term rally in commodities, but not a new long-term bull market (yet).
Silver’s outperformance over gold has offered a tactical trade opportunity, which is ongoing.
The US dollar’s weakness and recent commodity price action support the case for a counter-trend move, but wildcards like geopolitics remain in play for certain commodities, like crude oil.
I expect this commodity rally to be temporary, likely ending with the next market liquidation rather than evolving into a super-cycle.
We look forward, always. Not always right, but always with logical game plans and strategies.

Eight common precoius Bullion Bars arranged into prism

pryzmat

The Silver/Gold ratio trades, my name for a wider commodity rally, are on the cusp of another leg up

You could call them “inflation trades”, but the post-2021 phase and its heavy inflationary effects * saw commodities generally trend downward as hawkish Fed policy ** supported the US dollar.

So I came up with a new and more accurate way to describe a widespread commodity bull phase; the Silver/Gold ratio trades. When silver leads gold, the indication is that cyclical markets, pumped as they were through the magic of inflationary policy, are still okay.

With the Fed perceived to be in a box, antagonized by pesky inflation signals from the bond market as well as signs of a slowly decelerating economy, the time was probably right for silver to put on a show and take up leadership from gold.

In NFTRH 858 (April 13th) we began watching the chart below, noting the following.

I have a sneaking feeling that silver could make a catch-up move to its big bro. Just a hunch, as this weekly chart of the Silver/Gold ratio (SGR) proves there is little technical basis for it other than sometimes violent moves in one direction (in this case, down) are followed by violent moves in the other direction.

The SGR is thus far getting drubbed in its ongoing weekly chart downtrend. For an example refer to 2020. That tank job was an event driven situation, much like today’s is an event driven situation of a different stripe. If silver were to take leadership in the near-term, I would see it as a relatively short “trade”, not a long phase if the liquidity constrained, deflationary macro view is to play out. If silver were to wait an extended period, such a phase could follow a deflation scare and central bank policy flip to dovish.

It’s worth considering at least, and as you know, I am no raving silver bug. I did initiate PSLV per the update linked above and added a bit more as I contemplated the potential noted just above. If silver were to outperform soon, I’d see it as a trade. If it were to do so after a deflation scare, it could be more structural in line with an inflating macro as central banks and governments do all they can to bring on Inflation/Stagflation.

Chart showing the Silver/Gold ratio trend over time, with annotations indicating a final plunge within a downtrend and a subsequent big spike. — Silver/Gold ratio (weekly chart) (stockcharts.com)

This current version of the chart updates the situation and still shows an intact downtrend. But the SGR is indeed on message. However, there was no deflation scare and as noted back in April, the implication is for a trade, not a new macro phase. Not nearly yet, anyway.

As a side note, this is the type of “look-ahead” that we do on a weekly basis. I won’t always be right, but I will always be forthright in my efforts to decipher the macro situation at any given point.

Dialing in the view to a daily chart, our goal for the SGR has been for at least one more leg up and this morning in pre-market at least, the ratio is on plan.

A chart illustrating the Silver/Gold ratio from May 2025 to June 2025, showing price movements, trend lines, and indicators including moving averages and oscillators. — Silver/Gold ratio (daily chart) (Tradingview.com)

The foil in all of this is dear old Uncle Buck, as USD sported a positive divergence by RSI at a recent low, bounced to the 50 day moving average, and promptly failed again.

A chart displaying the USD/DXY (U.S. Dollar Index) with indicators of price movements, support and resistance levels, and commentary on the macroeconomic situation. A smaller image is embedded showing a character with a text overlay expressing skepticism about the current economic climate. — US Dollar index (Tradingview.com)

With war, geopolitics and political/monetary jawbones in the picture (ref. crude oil’s ill-fated and unsurprising spike and failure of its own), there are wildcards in the picture. Energy commodities, especially, often go their own way.

Two posts at X — Gary’s posts at X (x.com)

Note that the X posts above did not receive much attention, or at least approval. That could be a sign of how aligned the herds were behind the popular belief, claiming bombing = skyrocketing oil = inflation!

Many people submit to the dogma of ill-conceived macro market analysis. This now public NFTRH+ update did show some real reasons to be bullish on oil back on June 4th.

The decks are again clear for oil to rally, as it has been driven back down to a support area. But there is a spectrum of other commodities out there, from traditional industrial metals to specialty items like Uranium, Rare Earth Materials and Platinum Group Metals. All in varying degrees of rally mode.

If the Silver/Gold ratio takes another leg up, look for that party to continue… and, given our view that this is a trade, not a new “super-cycle” era, probably fail spectacularly at the next market liquidation.

But first things first, a counter-trend rally in the Silver/Gold ratio and a tailwind for the commodity complex.

* The actual inflationary machinery was the Fed/Government combo of monetary and fiscal panic in Q1, 2020.

** Too late as I repeatedly noted at the time.