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What is the Gold-Silver Ratio?
It is the dynamic moving amount of silver one can theoretically buy with a fixed amount of gold. Typically in the western world, the gold to silver ratio is measured in the number of troy ounces of silver one can acquire with one troy ounce of gold. Although it can also get estimated in equivalent sizes of bullion weights: grams, kilos, tonnes, etc.
Many modern-day gold and silver bullion buyers and traders use the fluctuating Gold Silver Ratio to determine which precious metal may be poised to outperform the other.
For example, we will examine times the Gold Silver Ratio has fallen above or below its 20th and 21st Century averages or longer, which will show you in various longer-term Gold Silver Ratio charts below.
Depending on their outlook, time horizons, and beliefs, physical precious metal savers may want to buy more gold or more silver depending on whichever may appear to be more undervalued to the other.
In terms of geologists, we find roughly 8-parts of silver to 1 part gold in the ground. Silver and gold’s historic monetary ratio has typically averaged around 16 has little if nothing to do with how they are valued today. Remember that silver has been divorced from the modern financial system since 1964.
Only produced by star explosions, the lacking precious supply of both physical silver and gold bullion is one significant attribute to its enduring value. There are of course many trillions of other reasons the world saves silver and gold for wealth preservation and even appreciation at the right timeframes.
Extreme privacy between the two bullion types is just one additional attribute they both share.
Gold Silver Ratio Volatility
Throughout documented history, the Gold Silver Ratio has varied widely.
Often what happens in bullion bull markets, gold tends to outperform silver in the beginning acquisitions phases. Silver historically plays catch-up and outperforms gold in a more speculative environment, when the average ‘man on the street’ and even high net worth investors begin choosing silver bullion over gold bullion allocations.
Look back to the bull markets of both 1980 and 2011 for illustrations of these stated facts. And no older-timers, it was not merely the scapegoated Hunt Brothers silver speculations that caused virtually all commodities to multiple in US dollar values many-fold throughout the 1970s.
When silver performs best versus gold in recent history is often during timeframes in which fiat currencies and their enduring values are most acutely called into question by the investing masses. Many bullion buyers, including ourselves, believe another era of fiat currency faith loss will come to fruition soon enough.
Go to our Frequently Asked questions to know more about Gold/Silver Ratio!