Gold Silver Ratio Guide: Chart, calculation & Example

What is the Gold-Silver Ratio? 

The GSR measures how many ounces of silver it takes to buy an ounce of gold. This ratio has fluctuated over the centuries, reflecting the shifting value of these two precious metals. Here are some of the factors that may affect GSR. 

• Traders watch the GSR closely as it can indicate different market dynamics for precious metals. 

• Inflation and Deflation: During times of high inflation, investors often flock to gold as a hedge, driving up the gold price and increasing the GSR. In contrast, deflationary periods may see silver holding more appeal because of its industrial uses, potentially narrowing the GSR.  

• Market Sentiment: Gold is generally seen as a “safe-haven” asset, meaning investors often turn to it in economic or geopolitical uncertainty, pushing the GSR higher. 

• Industrial Demand: Silver has various industrial uses, from electronics manufacturing to renewable energy. During periods of economic growth when industrial demand is strong, silver prices may rise relative to gold, narrowing the GSR. Conversely, if industrial demand slows down, silver prices may weaken, leading to a higher GSR. 

• Central Bank Policy: Interest rate policies can also impact the GSR. When rates are low, gold becomes more attractive as a store of value, driving up its price and raising the GSR.  

Historical Gold-Silver Ratio Chart 

How to Calculate the Gold-Silver Ratio 

Calculating the Gold-Silver Ratio is simple and provides a quick insight into the relative value of these two metals.  

If gold is trading at $2,752 per ounce and silver at $34 per ounce: 

[Equation] 

This means buying one ounce of gold would take 81 ounces of silver.  

Trading with the Gold-Silver Ratio 

The Gold-Silver Ratio is popular among precious metals traders, who adjust their positions when the GSR trend significantly changes. Traders typically aim to increase their holdings over time to exploit gold to silver market cycles. 

• High Ratio Example 

Market Context: During the early stages of the COVID-19 pandemic, the GSR spiked to a high of 114.28 as investors flocked to gold as a safe-haven asset. Gold approached a high of $1,591.93, and silver was at $13.93.  

Trade: At this high ratio, a trader might have exchanged one ounce of gold for around 114 ounces of silver, expecting the ratio to fall as markets eventually stabilize.  

• Low Ratio Example 

Market Context: In February 1980, amid high inflation and strong demand for silver, the ratio dropped to 15.69, with gold priced at $557.39 and silver at $35.52. 

Trade: At this low point, a trader could swap their 15 ounces of silver for an ounce of gold, taking advantage of silver's relative strength during this period. 

• Using Long-Term Averages 

Market Context: If the GSR is significantly above its long-term average, it may indicate that gold is overvalued relative to silver and vice versa.  

Trade: A trader may decide to sell gold and then buy silver or open a short position in gold while long silver in anticipation of a return to a lower GSR.   
 

• Overall Average GSR 

Since December 1999, the average Gold-Silver Ratio was approximately 67.2*. This average could serve as a benchmark for traders to identify periods when the GSR deviates significantly from its historical average.  

*Note: As of September 2024 

Why Trade Precious Metals with TMGM 

Trading precious metals like gold and silver with TMGM offers a range of benefits that empower traders to capitalize on market opportunities with confidence and flexibility. Here’s why TMGM is the ideal platform for trading precious metals: 

1. Advanced Trading Tools: TMGM provides powerful tools for in-depth market analysis, including live price charts, customizable indicators, and real-time data to help you make informed trading decisions. 

2. Flexible Leverage Options: Use leverage to optimize your trading strategy, allowing you to open larger positions with smaller capital outlay. This flexibility can enhance your potential gains while effectively managing risk. 

3. Competitive Spreads and Low Fees: TMGM offers competitive spreads on gold and silver CFDs, ensuring that more money goes into your trades instead of fees. 

4. 24/5 Market Access: Trade precious metals anytime, with round-the-clock access during market hours. This gives you the freedom to act whenever market conditions are favorable. 

5. Security and Reliability: TMGM is a trusted and regulated broker with a strong commitment to security and client satisfaction—trade in confidence, with TMGM.  

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