As a matter of fact, some investors actively trade back and forth between gold and silver using the gold-to-silver ratio. The gold/silver ratio measures the number of ounces of silver required to purchase one ounce of gold. The gold and silver ratio represents more than just a simple price relationship—it reflects the complex interplay trade your way to financial freedom between monetary and industrial factors affecting both metals. While the historical pattern of ratio peaks preceding silver price rallies is compelling, investors should view it as one tool among many for understanding precious metals markets. Most investors intuitively know that it is best to buy precious metals when prices are low.
Be the first to discover the latest products and the latest news about precious metals. Some investors use the ratio to determine optimal entry and exit points, buying silver and selling gold when the ratio is historically high, then reversing the trade when the ratio normalizes. The silver market is substantially smaller than the gold market in terms of total value.
What Is the Gold/Silver Ratio?
Of course, nothing is guaranteed for investors – especially if your goal is to time the market. For most investors, gold and silver are exceptional long-term investments rather than short-term commodities. Still, many traders swear by the gold silver ratio as a solid method used to predict the relative value of gold versus silver. When the ratio is high, investors often sell their gold to take advantage of low silver prices.
Live Spot Gold
The gold/silver ratio represents the proportional relationship between the prices of gold and silver. The gold-silver ratio is calculated by dividing the current price of gold by the current price of silver. Historically, the GSR has spiked during periods of economic uncertainty, such as the COVID-19 pandemic.
Trading the gold-silver ratio is an activity primarily undertaken by hard-asset enthusiasts often called gold bugs. Because the trade is predicated on accumulating greater quantities of metal rather than increasing dollar-value profits. If you decide to purchase physical gold—either within or outside an IRA—the dealer you select can make the process easier. Plus, dealers may have useful charts to help you track spot prices, the gold-silver ratio, and more.
How is the Gold Silver Ratio Determined?
That’s because historically, precious metals have served as reliable portfolio hedges during periods of market volatility, economic downturns and recessions. The gold-silver ratio is the comparison of the price of gold to the price of silver. It has been used to measure the relative value between the two precious metals for centuries and has played a significant role in the history of currency and trade. The gold-silver ratio is the price of physical gold divided by the price of silver.
- They place bets on the direction of the ratio based on their sense of the likely direction of the prices of one or both metals.
- This meant the gold/silver ratio was far more stable in the past than it is today.
- A new trading precedent has apparently been set, and to trade back into gold during that period would mean a contraction in the investor’s metal holdings.
- Increasing industrial applications for silver, particularly in green technology, can create additional demand drivers that may influence the ratio independently of investment demand.
- Importantly, the gold-silver ratio shouldn’t be the only tool you use to make investment decisions about trading precious metals.
Real World Example of the Gold/Silver Ratio
While that may be appealing, it’s important to note that silver tends to be more volatile compared to gold. Silver may also play a role in portfolio diversification, but out of the two precious metals, gold has been a stronger option. “What people think is that they view gold and silver as similar items, as precious metals,” says Barone. “And so they kind of view this ratio as if it gets too big, they tend to think that then silver is undervalued, and that you should buy silver versus gold.”
To illustrate the gold/silver ratio, consider a scenario in which gold is trading at $1,500 per ounce and silver is trading at $15 per ounce. The gold/silver ratio would be 100, because it would take 100 ounces of silver to purchase 1 ounce of gold. The gold-silver ratio measures the amount of silver it takes to equal the value of an ounce of gold. The ratio remained fairly stable throughout most of history, starting to fluctuate only in the 20th century when governments stopped trying to fix gold prices. The practice of trading the gold-silver ratio is common among investors in gold and silver.
A ratio spread is an options trading strategy that entails the simultaneous holdings of unequal long and short options. Investors using this strategy would establish the spread by holding either long or short puts, or long or short calls on the same underlying security (e.g., gold or silver). Be the first to discover the newest products and the latest news about precious metals.
Gold Price
The gold silver ratio may seem complicated to new investors, but it’s actually pretty simple. As you’ll learn on this page, the gold silver ratio is one of the most important tools used by savvy bullion stackers to get the most out of their investments. We’ll explain what the gold silver ratio is, why it matters, and a few tips on how to use it to revolutionize your investing game. Over the last half-a-century, gold has averaged a daily move of 0.5% up or down in US Dollar terms, but silver has moved more than 0.9%. That’s because silver is a much smaller market than gold by value, around one-tenth the size. So the same flow of cash, in or out, will hit silver prices much harder, and that will move its ratio to gold prices down or up.
By monitoring the gold-silver ratio and understanding market dynamics, investors can make strategic decisions to optimize their precious metals portfolios in 2025 and beyond. The gold-silver ratio measures how many ounces of silver are equivalent in value to one ounce of gold. It’s calculated by dividing the current price of gold by the current price of silver. The gold-silver ratio (GSR) is a valuable tool for investors seeking to time their entry into precious metals. As of June 2025, the GSR is approximately 92, reflecting silver’s recent surge to a 13-year high and gold’s modest pullback from record levels earlier this spring.
When the ratio is higher and investors believe it will drop along with the price of gold compared to silver, they may decide to buy silver and take a short position in the same amount of gold. The gold-silver ratio provides insight into the relationship between gold and silver prices. As the price of gold per ounce continues to rise, it can be costly to get in if you want to buy physical gold.
- In 2015, Mr. Holmes led the company into the exchange-traded fund (ETF) business with the launch of the U.S.
- By monitoring the gold-silver ratio and understanding market dynamics, investors can make strategic decisions to optimize their precious metals portfolios in 2025 and beyond.
- The gold-silver ratio is affected by economic factors such as crude oil prices, stock market performance, global currency valuations and Treasury yields.
- If you decide to purchase physical gold—either within or outside an IRA—the dealer you select can make the process easier.
- J.B. Maverick is an active trader, commodity futures broker, and stock market analyst 17+ years of experience, in addition to 10+ years of experience as a finance writer and book editor.
$20,000 long-term CD vs. $20,000 short-term CD: Which earns more now?
For those worried about devaluation, deflation, currency replacement, and even war, the strategy makes sense. Precious metals have a proven record of maintaining their value in the face of any contingency that might threaten the worth of a nation’s fiat currency. A higher ratio suggests that silver is undervalued compared to gold, and a lower ratio indicates the opposite. Accordingly, investors may be able to predict how the ratio will help them make trading decisions. Mr. Holmes is a regular commentator on the financial television networks CNBC, Bloomberg, BNN and Fox Business, and has been profiled by Fortune as well as The Financial Times. His thoughts on gold are captured each week on a program called Gold Game Film in collaboration with Kitco News and TheStreet.com.
What is the Gold/Silver Ratio?
Monitoring the gold-silver ratio can help investors make informed trading decisions. This can be accomplished by attempting to foresee how prices of the two metals are moving. They may trade their gold for silver when the ratio is high, and trade their silver for gold when the ratio is low. As long as the gold-silver ratio moves in the direction an investor anticipates, the strategy is profitable regardless of whether gold and silver prices generally are rising or falling. Currently, the price of silver per ounce is around $32, making it a much more cost-effective option than gold and giving it a lower barrier to entry.