LIVE MARKETS-Plunging gold/silver ratio has precious metals miners going parabolic

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PLUNGING GOLD/SILVER RATIO HAS PRECIOUS METALS MINERS GOING PARABOLIC

Gold touched a record high on Tuesday, just shy of breaching the $4,500 per-ounce threshold, as a weaker dollar and persistent geopolitical uncertainty boosted demand for the safe-haven metal, while silver continued its rally to an all-time peak. In fact, for the first time, silver has hit $70 per ounce.

With this, the gold XAU=/silver XAG= ratio is plunging to a more than 10-year low.

Gold has been a top performer in 2025. It's now risen around 71% year-to-date (YTD), which has it on track for its biggest yearly gain since 1979. However, silver's jump has been even more spectacular. It's now up around 144% YTD, which has it on track for its biggest yearly percentage gain ever using LSEG data back to 1983.

As a result of silver's outperformance, the gold/silver ratio, which ended last year at about 91, has plunged to 64.41, underpinning a parabolic rise to record highs in the Philadelphia Gold/Silver Index .XAU, a cap-weighted index of gold and silver mining companies.

The XAU index is posting a more than 160% YTD surge, well outperforming the benchmark S&P 500's .SPX 17% rise. Communication Services .SPLRCL, the top-performing S&P 500 sector this year, is up 31%. The Philadelphia Semiconductor Index .SOX has risen just over 43% this year.

It's been said that parabolic price gains rarely end well. Thus, traders should not take their eyes off their charts. However, on Tuesday, the gold/silver ratio, which is now around 63.60, is breaking its 64.21 February 2021 trough, putting it at its lowest level since summer 2014. This can suggest a much deeper drop. In that event, precious metals miners and the metals could see even greater gains.

Of note, in 2010-2011, when the XAU index, silver and gold all topped at then-record highs (XAU index high December 2010, silver high April 2011, gold high September 2011), the ratio bottomed in April 2011 at 31.71.

(Terence Gabriel)

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