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Gold/silver ratio definition
The gold/silver ratio is the number of troy ounces of silver it takes to buy one troy ounce of gold. It is found by dividing the gold price by the silver price, and traders use it to judge whether one metal looks cheap relative to the other.
When the ratio is high, gold is expensive compared with silver; when it is low, silver is relatively dear. Some traders watch the ratio for mean-reversion signals, shifting exposure between the two metals as it stretches above or below its historical range.
The ratio is a relative measure, not a price, so it says nothing about the direction of either metal on its own. Both can rise together while the ratio still moves, because it tracks only the gap between them.
Gold/silver ratio Example
You want to compare gold and silver, with gold at USD 2,400 and silver at USD 30.00 per troy ounce.
The ratio is: 2,400 √∑ 30 = 80
So it takes 80 troy ounces of silver to match the value of one troy ounce of gold. These prices are illustrative.
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