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Silver prices were consistent with gold’s long-term uptrend in the market and supported by its own fundamentals, rising vertically to $121 in late January before experiencing a massive 47% correction within days. Can we say that the yearly peak for silver prices is $121? On the other hand, is the recovery phase of silver prices relative to gold over?
At current prices, gold has a market capitalization of $35 trillion ($35T), while silver hovers around $4.5T. In comparison, the US GDP is $29T and the global monetary aggregate (M2) is $110T. (
Silver does not have the same status as gold and will never reach its market value. However, there are cycles of outperformance and underperformance between gold and silver, and it is this cycle that interests me today.
The chart below shows Japanese candlesticks on the daily time frame for silver prices. (XAG/USD)
Here are the technical factors currently dominating silver (XAG/USD) in the precious metals space of commodity markets:
• XAG/USD hits $121, achieving major technical objectives and reaching very overbought levels
• In early February, silver prices fell 47% in a few trading days; the uptrend phase was over
Linearly present since last summer
• The technical system no longer indicates a vertical upswing, but the overall trend remains bullish as long as the major support levels of $48/50 hold.
• According to applied technical analysis, the period of dominance of XAG/USD relative to XAU/USD (the stock exchange gold price) has ended. About the Silver/Gold Ratio
On the monthly log scale chart, a move toward $121 corresponds to a technical extension consistent with the historical magnitude of previous bull cycles. The monthly RSI reaches its maximum area near the peaks recorded in 1980 and 2011. This pattern typically reflects a phase of eventual exaggeration in the short term, even if the structural trend remains upward.
The chart below shows Japanese candlesticks on the monthly time frame for silver prices. (XAG/USD)
Therefore, the 47% adjustment should not be interpreted as a mere market surprise, but as a regime change. The market is moving from impulsive dynamics to an absorption phase. Excess funds have been liquidated, the most aggressive speculative positions have been eliminated, and prices are back testing key technical areas.
The $48/50 level is now a strategic pivot. It represents former major polar regions and historical resistance turning into support. As long as this area holds at the monthly close, the long-term major upcycle scenario remains valid. As for a clear breakout, it would pave the way for a deeper correction towards mild correction levels.
As for the Silver/Gold ratio, a breakout of the downward pressure pattern followed by the RSI peaking around the 90 level usually signals the end of an outperformance phase. Historically, when this ratio reaches excessively high levels, a trading period that favors gold begins. This does not necessarily mean an absolute decline in silver prices, but rather a relative weaker performance compared to gold.
All in all, the $121 peak could represent an important mid-term peak in the current cycle. The main trend of silver remains above the 48 mark
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