Gold to Silver Ratio 100 Year Historical Chart

This interactive chart tracks the current and historical ratio of gold prices to silver prices. Also back in 2001, at the start of the current bull market in precious metals, gold performed better than silver and precious metals miners did better than both metals. Silver reached its lows in November 2001 (see the chart of that period of time below comparing, gold, silver and the XAU miners index). Investors were rushing toward gold due to the panic around the Corona Virus and crashing sharemarkets in early to 2020. But so far this has not resulted in a large change in the silver price.

Exchange-traded funds (ETFs) offer an accessible and simple means of trading the gold-silver ratio. Again, the purchase of the appropriate ETF—gold or silver—at trading turns can be used to execute your strategy. Some investors prefer not to commit to an all-or-nothing gold-silver trade, keeping open positions in both ETFs and adding to them proportionally.

1. The ratio spiked to almost 90 before then falling sharply for 2 years, down to 31, as silver caught up to gold.
2. Before the adoption of the fiat currency system, national currencies were often backed by gold or silver.
3. Viewing the gold to silver ratio over time in a chart can be helpful.
4. The gold/silver ratio measures the number of ounces of silver required to purchase one ounce of gold.
5. Consider buying gold when the ratio gets below 50 and buy mostly silver when it’s above 70.
6. The difficulty with the trade is correctly identifying the extreme relative valuations between the metals.

We are likely to start to see silver gain some ground on gold. Maybe this year or next and then continue into the coming years. Long term we could see the ratio return down to 30 as it did in 2011. Or even below 20 as it did at the conclusion of the 1980’s precious metals bull market. The gold silver ratio is simply the price of an ounce of silver divided into the price of an ounce of gold.

The resulting number shows how many ounces of silver it takes to buy an ounce of 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. In 1913, the Federal Reserve was required to hold gold equal to 40 percent of the value of the currency it had issued.

Gold vs. Silver

However as noted already, it’s worth looking back to 2008 in our earlier gold to silver ratio chart. You’ll see that silver fell during the early stages of the 2008 crisis (depicted by the ratio rising sharply). The gold silver ratio is telling us to buy silver over gold currently. So silver is very undervalued compared to gold on a historical basis. Viewing the gold to silver ratio over time in a chart can be helpful.

Before the adoption of the fiat currency system, national currencies were often backed by gold or silver. This meant the gold/silver ratio was far more stable in the past than it is today. Indeed, it would often be fixed at specified exchange rates relative to units of national currency.

The gold-silver ratio is calculated by dividing the current price of gold by the current price of silver. This will show you which metal is increasing in value compared to the other. That’s because gold and silver are valued daily by market forces, but this has not always been the case. The ratio has been set at different times in history and in different places by governments seeking monetary stability.

Real World Example of the Gold/Silver Ratio

The ratio can be helpful in determining whether to buy more gold or more silver at any given time. Purchasing physical gold comes with the added cost of having to store it. It can be a better financial decision to gain exposure to gold through funds and the stocks of gold companies. As of December 2020, the gold/silver ratio was about 75, down from 114 in April 2020. The ratio has steadily climbed since reaching a nadir of 31 in April 2011. But right now the ratio continues to say that silver may be a better buy than gold.

The ratio spiked to almost 90 before then falling sharply for 2 years, down to 31, as silver caught up to gold. Or put another way, silver remains very unloved compared to gold. In fact, within 3 years silver rose to touch its all time high of close to $50 an ounce from 1980. The chances are much better that gold will go up significantly in price before silver. A good rule of thumb in determining which metal to buy is shown in the chart below. The Gold to Silver ratio (GSR) is used as a method of valuing silver against gold.

Because the trade is predicated on accumulating greater quantities of metal rather than increasing dollar-value profits. This is the best of savvy investment strategy; take a simple mathematical equation and trackhistorical price behavior. When the ratio has topped 80, it has signaled a timewhen silver was relatively inexpensive relative to gold. Silver went on to rally 40%, 300%, and400% the last three times this happened. “Over the last 100 years, the major peaks and troughs of the silver/gold ratio [GTSR] have marked HISTORIC turnings in the markets. There are a number of ways to execute a gold-silver ratio trading strategy, each of which has its own risks and rewards.

That’s because the relative values of the metals is considered important rather than their intrinsic values. So even if the ratio were to go higher, we think a major move higher for silver is only a matter of time. Previously we had thought this trend might be coming to an end.

What’s most important is that the investor knows their own trading personality and risk profile. The difficulty with the trade is correctly identifying the extreme relative valuations between the metals. 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.

How Is the Gold-Silver Ratio Calculated?

So there is a good argument for heavily skewing any purchases in favour of silver. Gold is viewed as more of a flight to safety or crisis hedge than silver. So it could be that gold has been stronger than silver due to some worry that sharemarkets are overdue for a correction. But as fast as the ratio spiked up in 2020, it fell down almost as quickly.

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These periods are removed from the data set and appear as gaps in the rolling correlation series. Diversification is the practice of spreading investments across different asset classes to reduce risk. In his book Principles, Ray Dalio called diversification the “Holy Grail of Investing”. https://www.tradebot.online/ He realized that with fifteen to twenty uncorrelated return streams, he could dramatically reduce the risks without reducing the expected returns. Because gold and silver prices change based on the law of supply and demand, the gold/silver ratio has fluctuated over time.

The prices of gold and silver are most often reported per ounce. However we have serious doubts that this will prove to be the case. As more people begin to realise inflation is like to be here for many years to come, more people will look to gold to protect them. At the same time this will likely attract more people to silver too.