"The gold/silver ratio is falling rapidly...perhaps towards its historical norms; I don't know. Is there a reason for this, and where should one place a target? Thank you."

Eoin Treacy's view Thank you for a topical question which I'm sure will be of interest to other subscribers. Fullermoney has often referred to sliver as "high beta gold" and this is no less true today. Silver has rallied impressively run over the last month and rallied more than $4 in the last five days alone. It is outpacing gold and appears to be bouncing from an historic level of resistance relative to the yellow metal.

Gold at 50 times the price of silver has offered an inflection point on at least five occasions since 1998. The ratio has accelerated lower and is testing that level today. Additional follow through tomorrow would likely indicate the onset of a period of underperformance for silver.

The Dow Jones Industrials / Silver ratio continues to extend the 9-year downtrend and a break of the medium-term progression of lower rally highs would be required to question the consistency of sliver's secular outperformance.

This 10yr chart of silver displays a notable consistency in the size of advances following breakouts from lengthy trading ranges. In 2003, silver broke out of its base and rallied from $5.40 to $8.50 (57%). In 2005 it broke out of an 18-month consolidation, rallying from approximately $8.50 to $15 (76%). In 2007 silver completed another 18-month consolidation and rallied from $15 to $21.40 (42%). It broke out a 30-month consolidation in September rallying from $20 to $28.79 (44%) as of the time of writing. This would suggest that a rise in the order of 50% following a major breakout could be considered average for this market.

Silver has clearly accelerated, reached an area of potential resistance relative to gold and its advance to date is closing in on what could be considered the upper limit when compared to similar breakouts over the last decade. The $30 level appears to be offering at least near-term resistance today and the odds have increased that an unwinding of recent powerful gains is unfolding.

Palladium has also accelerated and is now more than $200 above its 200-day MA but pulling back today. Gold broke successfully above $1400 this week but closed below that level today. Platinum has also pulled back somewhat today.

On previous occasions, medium-term peaks in silver have been confirmed by concurrent downward dynamics on the other precious metals. Given the acceleration in silver and palladium and today's weak closes, the odds that a medium-term peak has been reached have increased substantially.