Technical Analysis: Short Silver, Go Long Gold

Silver vs. Gold Ratio Analysis

• 💡 The gold-silver ratio has reached an extreme, with 1 ounce of gold buying 55 ounces of silver, down from 107 in April.
• 🎯 The long-term average since the 1970s is approximately 60 ounces of silver per ounce of gold, indicating a return to the mean.

Historical Oversold Conditions

• 📈 The ratio is currently significantly below its 150-day moving average, indicating an oversold condition.
• 🔍 Historically, there have been 13 other instances since 1974 where the ratio has been this oversold.
• ⚠️ In 12 out of these 13 instances, silver underperformed gold on an absolute basis 3, 6, 9, and 12 months later.

Trading Strategy

• 💰 The suggested pairs trade is to short silver and go long gold.
• 📉 This strategy aims to capitalize on the historical tendency for silver to decline relative to gold after such extreme divergences.