Gold Siver Ratio - Watch the trend

GLD SLV Gold/Siver is trading up around levels that have tended to lead to significant silver outperformance on a relative basis. However, watching the prevailing trend in the gold-silver ratio also provides some clues as to the performance of silver on a absolute basis.

On the chart, marked are the three previous cases when the gold-silver ratio has broken down from its multi year up trend. When this has occurred, silver has performed quite well on both a relative and absolute basis.

Its looks possible for both gold and silver to test at a minimum the underside trend line that was lost during the recent bear market. However, due to the significantly deeper pull back observed by silver over the past 5 yrs I believe the upside relative to gold is much more significant.

Long silver on the break down of the prevailing gold-silver trend line.