Silver In Position To Lead Gold

Sunday, February 11, 2018

silver and gold

Gold Prices This Week and Next Week’s Outlook

Silver has doggedly refused to lead gold and in an instance of an indicator finally working as it should, the Silver/Gold ratio’s decline finally saw a big crack in the risk ‘on’ global market backdrop.

Flipping it over we have the Gold/Silver ratio, which has traditionally brought liquidity contraction to markets when it rises. The pain usually includes the gold sector ironically enough, even though the gold sector’s fundamentals improve during times of liquidity contraction (see Q4 2008 for resounding proof of this assertion). At that time USD was rising with a massive risk ‘off’ bid and gold was skyrocketing vs. oil, copper, stocks and all the things of the risk ‘on’ sphere.

So last week the most intense part of the stock market correction came when gold gapped up vs. silver. Well hallelujah for an indicator finally working as it should!

But where do we go from here?

Per this post at we anticipated a bounce in the stock market and on Friday afternoon it arrived, on cue.

Per this post at (and Gold-Eagle) we dialed out to a bigger picture to show the reasons that the fates of the stock market and the gold mining sector are very much intertwined.

The latest Commitments of Traders data for silver has continued its path toward a low risk ‘buy’ level. In fact, silver and gold prices declined further after the Feb. 6 record date, which means the odds overwhelmingly favor the CoTs having improved further than shown on the graphics below (courtesy of

In silver, large ‘Specs’ have continued to reduce long positions and Commercials have continued to reduce short positions toward a very low risk juncture. The ‘little guy’ is just hanging around.

As for gold, the situation was less favorable, but I find it notable (and positive) that the little guy is very under enthused about gold right now.

Taken at face value, the CoT imply a better risk vs. reward in silver than gold. Since silver usually leads rallies for the sector and given the broad stock market’s bullish (though likely temporary) reversal on Friday, let’s not be surprised to see the gold and silver sectors rally soon. The mining indexes are after all, at key support after taking a much needed correction to weed out the inflationists.


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Gary Tanashian of successfully owned and operated a progressive medical component manufacturing company for 21 years, keeping the company’s fundamentals in alignment with global economic realities through various economic cycles.  The natural progression from this experience is an understanding of and appreciation for global macro-economics as it relates to individual markets and sectors.