What is a gold-silver ratio?

The gold-silver ratio, also known as the mint ratio, refers to the relative value of an ounce of silver to an equal weight of gold. Put simply, it is the quantity of silver in ounces needed to buy a single ounce of gold. Traders can use it to diversify the amount of precious metals that they hold in their portfolio . Here’s how it works.

Why is the silver ratio so important?

Generally speaking, the higher the ratio, the more the market is favoring the acquisition of silver. This is because a high ratio indicates a cheap price of silver. Likewise, a low ratio is seen by many more sophisticated investors as the time to rebalance their portfolios towards gold and away from silver.

Should you buy gold or silver if the ratio is high?

A high ratio could signal that silver is undervalued, while a low ratio could imply gold offers better value. With this in mind, some traders aim to buy silver when the ratio is high and buy gold when it is low. The crux of trading the gold-silver ratio is accumulation.

What was the gold-to-silver ratio before 1900?

Since 1687 – as far back as the records reach – the gold-to-silver ratio vacillated between roughly 14 and 100. Around 1900, the ratio steadied, remaining relatively flat. Indeed, prior to 1900, the gold-to-silver ratio hovered around 16. This was likely because many countries were using gold- and silver-backed currencies.