Understanding the gold silver

ratio
View our comprehensive presentation on one of the most followed
ratios in the precious metals markets.
 What is the gold silver ratio?
The gold silver ratio is a tool for
measuring the value of one
precious metals relative to
another.

When the ratio is high (>60) it

suggests gold’s purchasing
power is stronger than silver’s.

When the ratio is low (<20), silver’s purchasing power is shown

to be stronger relative to gold’s.
 Historical gold silver ratios
Over time gold silver ratios have changed greatly, even if for most
of history 15:1 has been the average, with gold buying 15 times as
much silver.

In medieval Japan ratios of 3:1 were typical, whilst in Ancient

Egypt, ratios of 2:1 were the norm. These dynasties had limited
silver mines, meaning the restless metal was relatively more
prized within their borders.

In the last 40 years the ratio has averaged over 52:1, whilst
modern day ratios peaked in the early 1990s at over 100:1.

The lowest ratio, post 2000, was just over 30:1, when silver
surged to $45/ounce in April 2011. Large moves in the gold silver
ratio are normally driven by rapid price moves in more volatile
silver bullion.
Gold silver ratio plotted over time
High gold silver ratios – what do
they mean?
When the gold silver ratio hits highs of towards a 100:1 ratio, this
indicator is telling us that the markets are risk averse, that we may
be in recession, and that investors perceive danger.

During these times capital flows towards gold bullion are relatively
larger as safe havens shine, and investors flee more speculative
assets like silver bars.

During the recession of the early 1990s, the gold silver ratio briefly
exceeded 100:1, confirming the market’s mood of the time.
Low gold silver ratios – what do they
mean?
When the gold silver ratio sits at low levels in the 30s and 40s, this
silver investment indicator is telling us that the markets have an
appetite for risk, that stock markets are rising and maybe peaking,
and that investors are willing to bet on economic prosperity.

During these times capital flows towards gold bar investments

wane, as safe havens are deemed less appealing and assets like
silver bullion attract fervour and increasing amounts of money.

During silver’s meteoric rise in mid-2010 to early 2011, silver

prices went parabolic nearly touching all time highs of
>$50/ounce, resulting in the gold silver ratio bottoming at 30:1.
 Ending notes
The gold silver ratio is indeed a useful bullion investment indicator,
with a deep history and the potential to offer lots of insights.

However, technical analysis of charts and ratios is not perfect, and

investors should not bank on something happening because ‘the
gold and silver ratio says so’.

You might be best served to enjoy using the gold silver ratio as an
interesting footnote to your investing, comparing long term levels
of gold and silver prices and helping you understand how the two
precious metals’ prices are moving in relation to each other.