The current ~75:1 #silver to #gold ratio is roughly 2.6 standard deviations above the modern historical average — one of the most stretched levels in decades, signaling silver’s relative undervaluation.
This 75:1 level reflects a significant positive deviation, historically associated with silver being undervalued & presents the potential for mean reversion (silver often outperforms gold percentage-wise after such extremes).
For context: Peaks above ~2–3 standard deviations (e.g., 1991, 2020) have preceded strong silver rallies.
The ratio has spiked above 100:1 in extreme stress periods (most recently during COVID when the ratio spiked to 126:1) but tends to revert toward 50–70 over time over the past few decades of the current monetary system.
The 126:1 ratio hit in 2020 stretched to an astonishing 4.5 standard deviations above the modern historical mean for the silver/gold ratio- a once in a generation outlier on the high side (silver extremely undervalued relative to gold).
Historical Context and Deviation:
The “historic average” for the gold/silver ratio depends on the time period considered:
➡️Very long-term (centuries, including fixed-ratio eras): The Historic silver/gold ratio is typically cited at around 10–15:1 (e.g., Roman Empire ~12:1, U.S. Coinage Act ~15:1.
➡️20th–21st century free-market era (post-1970s, when prices floated): S/G ratio typically traded in a range of 50–65:1
➡️Last 25–50 years: Around 60–68:1.
The longer term perspective reveals that historically- absent paper derivatives, suppression schemes & the modern monetary experiment- the silver / gold ratio consistently traded below 15:1!
With 5 consecutive annual structural supply deficits, and a recent massive physical inventory squeeze in October, a very real potential exists for silver prices to drastically outperform gold in the coming years.
It is even becoming increasingly more likely that the decades old paper manipulation scheme suppressing silver prices fails entirely.
What would such a scenario mean for silver prices, & the silver to gold ratio?
Let’s start by taking the current 2.6 standard deviations to the upside from the modern historical average, and apply the same number to the downside.
What would a 2.6 standard deviation move to the downside mean for the silver to gold ratio?
A symmetric move of 2.6 standard deviations to the downside (i.e., silver becoming relatively overvalued vs. gold to the same degree it is currently undervalued) would place the ratio at≈ 27:1.
This level was last seen in 1980, when the ratio exceeded 27:1, hitting a low of 17:1.
27:1 is entirely plausible in the near term- we have a historic example of this level being surpassed even in the modern monetary era during a big bull move in silver prices.
Based on current gold prices, a silver to gold ratio of 27:1 would mean $156/oz silver!
Gold prices are unlikely to remain static however with a 2.6 standard deviation move in the silver/gold ratio.
A 27:1 ratio with a coinciding gold move to $10,000/oz would mean $370/oz silver prices!
What about a statistical once-in-a-generation level event? (We’re thinking the unexpected end of the paper manipulation scheme in silver)
What would a 4.5 standard deviation move to the downside mean for the silver to gold ratio?
A move of 4.5 standard deviations to the downside (silver becoming extremely overvalued relative to gold, symmetric in magnitude to a major high-side blow-off) would place the ratio theoretically at: ≈ -0.25.
Read that again.
A once in a generation level event (such as the collapse of the paper manipulation scheme that has suppressed silver prices for 5 decades) could statistically send silver prices HIGHER than gold.
The numbers reveal that the end of paper manipulation of the silver markets (likely brought about by a PHYSICAL SILVER INVENTORY SQUEEZE) could result in life changing moves in silver prices & the silver to gold ratio.
We are bullish on gold. We’re more bullish on silver.
Note: This is not a price forecast or investment advice, simply an exercise in statistical possibilities in a correction/ overcorrection for the silver to gold ratio.
