LIVE MARKETS-Precious metals miners set to plummet amid violent gold/silver ratio reversal

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PRECIOUS METALS MINERS SET TO PLUMMET AMID VIOLENT GOLD/SILVER RATIO REVERSAL

Gold XAU= prices are tumbling more than 6% on Friday as the dollar strengthened after President Donald Trump chose former Federal Reserve Governor Kevin Warsh to head the U.S. central bank when Jerome Powell's leadership term ends in May. Silver XAG= is taking an even bigger hit. It's down more than 14%.

Of note, gold is on track for its biggest daily decline since April 2013. Even with this, the safe-haven metal remains set for its biggest monthly gain since 1999. Silver is on pace for its biggest daily fall since August 2020. Despite this, silver is still set for its biggest monthly rise ever.

Nevertheless, the gold/silver ratio is reversing to the upside from support, suggesting silver's run of outperformance has met an end for now.

On Tuesday of this week, the ratio ended at 45.92, which was its lowest level since September 2011. It was also within a support zone defined by a number of significant lows in the 43.7-47.6 area.

Additionally, on Tuesday, the ratio ended 44.87% below the value of its 200-day moving average $(DMA)$, which was an all-time low for this measure. The ratio's 200-day disparity has a support line around -45.5%.

Now on Friday, the ratio is back over 51, and the 200-day disparity has recovered to -37.8%.

V-bottom reversals in the ratio and the 200-day disparity in 1987, 1998, and 2011 signaled extended periods in which gold outperformed silver.

Coinciding with the recent surges in gold and silver, and the plunge in the gold/silver ratio from its April 2025 high, precious metals mining shares went parabolic over the past year or so. The Philadelphia Gold/Silver Index .XAU, a cap-weighted index of gold and silver mining companies, surged 150% last year vs. an S&P 500 index .SPX gain of 16%. So far this year, the XAU index is up 27.7% vs. a 1.8% rise for the SPX.

However, with gold and silver plummeting on Friday, and the ratio turning violently higher, precious metals mining shares are under pressure. The VanEck Gold Miners ETF GDX.P is quoted down nearly 8% in premarket trading. The Amplify Junior Silver Miners ETF SILJ.P is down about 10%.

(Terence Gabriel)

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(Terence Gabriel is a Reuters market analyst. The views expressed are his own)