After conducting a comparative analysis of an advent of exhaustion by the and futures on the last day of this week, I anticipate that the advent of reversal by ratio, after testing this week’s low at 49.47, current at 51,86, look evident enough to have a inverse corelation between the silver, gold and XAU/XAG ratio as both the precious metals have experienced an exhaustion despite testing their record highs this week.
Undoubtedly, silver futures are set to lead this exhaustion, dropping 4.50% on Friday, while gold fell about 0.74% with four hours left until the week’s close.
The fall in both precious metals likely stems from the same factors: easing geopolitical tensions involving Iran and expectations of Federal Reserve interest rate cuts at its January 27-28, 2025, meeting.
While the technical reasons could also be the same as both the gold and silver futures have even above overly stretched valuation where they have already lost their safe-haven potential, while the spot gold and silver ratio have just started to reverse from the record lows this week.
Undoubtedly, inverse correlation between gold and silver futures and XAU/XAG ensures a reversal in the spot gold/silver ratio could result in both the gold and silver futures next week, as evident from the exhaustion seen in both the futures on the las the last day of this week.
I find that the silver futures could lead this fall in four times faster than gold futures, and is equal to the percentage reversal by the XAU/XAG ratio, as it is the same at the current level on Friday.
Undoubtedly, silver prices were heading for a weekly gain of about 15% after pushing to fresh records earlier in the week, even as prices pulled back after the Trump administration said it would delay import tariffs on critical minerals.
Though silver continues to attract speculative interest, increasingly from both buyers and sellers, resulting in price swings and challenging trading conditions.
Undoubtedly, silver has sharply outperformed in recent months, with prices posting gains in days that previously took months or even years to achieve. The move has been described by analysts as “Unusually strong.”
Silver futures are already up over 25% year-to-date, which is unprecedented. An important aspect of this rally is the growing role for retail participation, setting silver apart from other precious metals and broader commodity markets.
But I find that if the precious metals slip on a slide, silver will lead this selling spree as soon as the XAU/XAG ratio found steep reversal from the current levels.
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Disclaimer: Readers are advised to take any position in gold and silver futures at their own risk, as this analysis is based only on observations.
