There's a little bit of tarnish on silver now. Silver spent the first five months of 2009 building strength against gold. The gold/silver ratio, which started the year at 80-to-1, slumped to a 61 multiple at the beginning of June. It's been rebounding since then and now has breached its former breakout level at 68x.

Gold/Silver Ratio

You can look at this development in a number of ways. As silver has more industrial utility than gold, the white metal's relative weakness could be taken as an indicator of flagging faith in a recovery. Gold's vigor vis-à-vis silver can also be seen as a symptom of capital flight to a safe haven. With both metals in an intermediate downtrend, though, the former scenario seems more apt than the later.

In the June 2 edition of the Desktop, we noted an incongruity in open interest trends for gold and silver: "Not only did the white metal meet and exceed the trading objective forecast by its breakout, it did so while building open interest. That, in a strange way, makes silver even more vulnerable. The silver market may, in fact, be overextended with weak hands now. Near-term support for the July contract is at $15.10 and $14.73."

The following day, the gold/silver ratio reached its year-to-date nadir as silver heeled over into its current swoon.

COMEX Silver (Jul. '09)

In London this morning, the gold/silver ratio touched a 70 multiple when silver was fixed at $13.41 against a $936 gold price. Yesterday, the July COMEX contract settled at $13.75.

Continuing weakness would point bears toward $12.53, the 50% retracement level of July's November-June rally. Support for July contract could have been counted upon at $13.40, but overnight cash dealings as low as $13.27 have turned that into an interim ceiling. Buying now is likely at $13.12 basis July.

For holders of the iShares Silver Trust (NYSE Arca: SLV), the close-in support level translates to a $13.14 share price.