Precious metal traders can use this ratio to diversify their trading portfolios. Despite not having a fixed ratio, the gold-silver ratio is still a popular tool for precious metals traders. They can, and still do, use it to hedge their bets in both metals—taking a long position in one while keeping a short position in the other metal.
- Since then, the prices of gold and silver have traded independently of one another in the free market.
- Traders can use it to diversify the amount of precious metals that they hold in their portfolio.
- But the metal’s value had no bearing on the value of money, becoming just a token like copper or nickel coins.
- 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%.
This industry alone has created greater demand for this precious metal, aside from traditional industry demand potentially increasing alongside emerging economies. Shipping gold to where it was most highly valued offered a bumper Forex Brokers return in silver. It also helped close these geographical gaps in the Gold / Silver Ratio – a process known to modern financial traders as “arbitrage” – by improving the balance of supply and demand in each local market.
What Is the Gold/Silver Ratio?
Silver is a highly versatile metal and industrial demand is increasingly contributing to its scarcity. Therefore, it is not surprising that we see the gold silver ratio vacillating dramatically, as the variables considered in silver’s valuation shift in significance over time. Essentially, the ratio is a calculation employed by investors to assess the mercatox exchange reviews best time to invest. The ratio reflects the weight of silver it takes to purchase one ounce of gold. The calculation for it involves taking the market price of gold, then dividing this by the price of silver. If the current gold price is relatively high, it means it will take more silver to buy an ounce of gold, but this has not always been so.
What Is the Current Gold-Silver Ratio?
Even early 2020’s new record high in gold open interest has taken it only to 109%. The gold-to-silver ratio is indeed one of several valuable tools used to determine the optimum time to buy gold or silver bullion. The gold-silver ratio is calculated by dividing the current price of gold by the current price of silver. It is not recommended that this trade be executed with physical gold for a number of reasons.
Gold / Silver Ratio Guide
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. Open a BullionVault account today and you can claim 4 FREE grams of silver to test our service for yourself at no risk or cost. One estimate in the early 2000s said the above-ground stockpile of gold could meet more than 6,600 days of demand.
71% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money. For example, a gold level of $1,500 and a gold/silver ratio of 80 to 50 suggests silver being valued between $30 and $18 per ounce. On the other hand, a high gold/silver ratio of 120 to 90 suggests a value between $12.50 and $16.60. The ratio is important to investors as they trade it with the purpose of hedging certain metal positions as well as the ability to generate profits from their positions.
Geologists today believe silver is around 19 times more abundant than gold in the earth’s crust, but modern silver mine output worldwide is only 8 times greater than gold’s by weight each year. Such plus500 forex review heavy speculation in silver contrasts with its solid and steady demand from the industrial sector. Almost 60% of silver’s annual demand now comes for productive uses, versus barely 10% for gold.