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Economic and political uncertainty over the past few years have encouraged many new investors to enter the gold and silver bullion market. For those new to investment, there are a few new phrases and terms that may be unfamiliar, with one of those being the ‘gold-to-silver ratio’. In this article we will cover the meaning of the ratio, and how investors can use it as one of the indicators to determine the right time to buy or sell their precious metals.

What is the gold-to-silver ratio?

The gold-to-silver ratio is a calculation used by investors to evaluate the relative value of silver to gold and to determine the best time to invest. It shows the amount of silver it would take to purchase one ounce of gold.

At the time of writing, the current gold-to-silver ratio stands at 86 to 1. This means that it would take 86 ounces of silver to buy 1 ounce of gold.

How to calculate the gold-to-silver ratio

To calculate the gold-silver-ratio, simply take the price of gold, divide it by the price of silver and you have the gold-to-silver ratio. For example: 1,449 (gold price) / 16.71 (silver price) = 77 (gold-to-silver ratio).

How to use the gold-to-silver ratio

The higher the ratio, the more silver is favoured meaning it may be a good time to buy silver as it is somewhat cheap. A low ratio may signal that it is a good time to buy gold. Some experienced investors choose to trade their silver for gold as the ratio lowers.

How much does the gold-to-silver ratio fluctuate?
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88.44 Gold £1,471.41
Silver £16.64

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If you look back throughout history, since 1687 (the oldest records available) the gold-to-silver ratio has swayed between 14 and 100 but was stable at around 16 for centuries.

Because gold and silver prices change constantly due to supply and demand, the ratio fluctuates over time, and since 2000 the gold-to-silver ratio has mostly traded between 45 and 80, averaging at around 55. Currently, in August 2022, the ratio is at 86 with the price of silver being somewhat low.

Which direction is the gold-to-silver ratio likely to go in the future?

Some experts believe that the ratio should stand at around 16 to 1, which is the ratio of gold to silver on earth. However, some would argue that the ratio could fall further due to the fact that nine times more silver is currently mined than gold due to its use in industrial processes and manufacturing.

The covid-19 pandemic saw the demand for gold increase, with many people turning to gold as a safe haven during uncertain economic times, resulting in record-breaking prices and the ratio peaking at 123. The price of silver has remained a little more stable, however, resulting in a high gold-silver-ratio.

There are various factors that can influence gold and silver prices, and recent times have proven that it can be tough to predict. The gold-to-silver ratio is just one of several valuable tools used to determine the right time to buy gold or silver bullion. What is also important is that the investor knows their own trading requirements and risk profile in order to safely secure their financial future.

If you are looking to invest in precious metals, you can check the current live prices of gold and silver and the gold-to-silver ratio on our website here. If you need any more information about gold and silver investment, please feel free to contact our team on 0121 355 0620 or send an email to info@atkinsonsbullion.com.

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This blog represents one person’s opinion only. Customers should conduct their own research and take advice before making an investment. We do not offer investment advice.

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