7 Gold-to-Silver Ratio FAQs | U.S. Money Reserve
By John Rothans, Chief Procurement Officer of U.S. Money Reserve
If you’ve purchased precious metals consistently over the years, you’ve probably heard about the gold-to-silver ratio-especially when it breaks upward. With the ratio continuing to climb to new heights, now is one of the best times to pause and answer seven of the most commonly asked questions about the gold-to-silver ratio.
1. What is the gold-to-silver ratio?
The ratio measures how many ounces of silver it takes to buy one ounce of gold. It expresses the price relationship between the two precious metals. For example, if the gold-to-silver ratio were 50:1, you would need 50 ounces of silver to equal one ounce of gold.
According to Banyan Hill Publishing, the average gold-to-silver ratio since January 1990 has been around 65:1.
In theory, the larger the ratio, the more silver you need to buy one ounce of gold. You can look up the gold-to-silver ratio online or calculate it yourself by dividing the price of gold by the price of silver.
2. What is the gold-to-silver ratio today?
As of this writing, the gold-to-silver ratio hit a high of 113.76:1 and a low of 112.47:1.
Keep in mind that the gold-to-silver ratio can fluctuate as often as gold and silver prices-daily! You can track the ratio over the last 24 hours, 30 days, 60 days, 1 year, 5 years, and 10 years on MacroTrends.
3. How do you calculate the gold-to-silver ratio?
You can calculate the gold-to-silver ratio by dividing the current gold price by the current silver price.
Price of Gold / Price of Silver = Current Gold-to-Silver Ratio
Here’s an example if the price of gold were $1,712.30/oz. and the price of silver were $15.11/oz. Those precious metals prices would give us a gold-to-silver ratio of about 113:1.
1,712.30 / 15.11 = ~113:1
4. What is a “good” gold-to-silver ratio?
A “good” gold-to-silver ratio is subjective. What is your end goal? When the ratio increases (i.e., when the silver price is lower and thus you would need more ounces of silver to buy one ounce of gold), it can mean that silver is being favored more than gold, and it could be a good time to take advantage of affordable silver prices. A lower ratio can mean the reverse. Gold is being favored, and you may want to buy gold at a good price.
Because the gold-to-silver ratio changes so frequently, it can be difficult to make long-term decisions based on that number alone. Instead, consider using the ratio as one of the many data points you consult when determining whether it’s the right time for you to buy precious metals.
5. What is the historical gold-to-silver ratio?
Prior to the 20th century, the gold-to-silver ratio was fairly steady. It ranged between 12:1 and 15:1, notes Investopedia. However, throughout the 20th century, the ratio saw much more volatility thanks to major silver discoveries in the Americas and government attempts to shape precious metals prices.
The average gold-to-silver ratio was 47:1 during the 20th century. Over the last 10 years, the ratio hit a high of 124.46:1 and a low of 31.68:1, and Seeking Alpha commentator Jeremy Robson notes that the ratio has been rising for 9 years.
6. What should the gold-to-silver ratio be?
“There’s wide disagreement among market analysts and traders regarding the current norm or expected average level for the gold-to-silver ratio,” reports Investopedia. Some analysts believe the 20th-century average ratio (47:1) is healthy.
Others “continue to argue that the ratio should eventually return to much lower levels, around 17:1 to 20:1.”
Looking at the current gold-to-silver ratio, “It’s doing exactly what you would expect it to do [against] a weak economic backdrop,” writes Seeking Alpha’s Jeremy Robson. “It is steadily rising. If the economy remains weak after the present recession, I would expect that the gold-to-silver ratio will continue to rise.”
Robson’s expectations are based on how gold and silver are used. He argues that silver has more industrial applications than gold and is thus more sensitive to the strength of the economy than gold.
7. Why bother following the gold-to-silver ratio?
The ratio isn’t a silver bullet that will tell you exactly when to buy precious metals, but it can be a reasonably reliable indicator. Gold and silver prices have a long-established correlation and have moved in opposite directions only one time since 1968, and it was for a short time that lasted only seven consecutive days.
Consider keeping tabs on the gold-to-silver ratio as you consult other resources you trust. Access free special reports in U.S. Money Reserve’s Resource Library and call 1–844–307–1589 to speak with one of our professional Account Executives. You’ll receive a complimentary in-depth consultation regarding your overall objectives and long-term goals.
“I’ve watched gold for a long time. I remember when gold was $230.00 per oz…now look at it.”
Originally published at https://www.usmoneyreserve.com on May 1, 2020.