So most of the gold ever mined in history still exists in someone’s hands somewhere. The Silver Institute projects a significant supply deficit for silver in 2025, with industrial fabrication expected to grow by 3%, particularly in renewable energy, automotive, and consumer electronics sectors. Hedging is a strategy where a trader takes a position to protect themselves from potential losses in another position. This strategy is a means of diversification and can help reduce the trader’s overall risk and protect their portfolio. 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.
This metric is calculated by dividing the current gold price by the current silver price. For example, if gold trades at $2,300 per ounce and silver at $25 per ounce, the ratio would be 92. During the latter half of the 20th century, the gold silver ratio increased considerably. The outbreak of World War II and the collapse of the global gold standard were two particularly important events for the modern gold-to-silver ratio. Since the late 20th century, the gold-to-silver ratio has remained relatively steady in the range.
Ways to Use the Gold-Silver Ratio to Trade
But with silver now gaining momentum, many investors are reassessing their strategies to take advantage of the narrowing gap between gold and silver prices. This is typically accomplished by analyzing standard deviations, which suggest how far removed the asset’s price is from its mean price. In each, you block off as many squares as you can, which corresponds with the integer floor of the metallic mean. So in a silver ratio rectangle, you block off two squares and are left with a new, smaller silver ratio rectangle. If the folding paper is opened out, the creases coincide with diagonal sections of a regular octagon.
Buy silver or gold
The current spot price of gold or silver is not the only factor you can use to make better investing decisions. The gold silver ratio is considered one of the most important tools for investors who want to maximize profits while stacking precious metals. Importantly, the gold-silver ratio shouldn’t be the only tool you use to make investment decisions about trading precious metals. It’s crucial to consider other factors, like those mentioned above in addition to market trends, geopolitical events and economic indicators. Moreover, the ratio does not provide information about the absolute price of gold or silver, but only the relative value between the two.
Analysts suggest that silver may continue to outperform gold, potentially lowering the GSR further. Each pair of adjacent integers has its own metallic mean, which is the collective name for the full set of roots that includes the golden ratio. The sequence , of power fractional parts, where is the fractional part, is equidistributed for almost all real numbers , with the silver ratio being one exception. The long, medium and short diagonals of the regular octagon concur respectively at the apex, the circumcenter and the orthocenter of a silver triangle. Since 1995, Goldseek.com has served millions of readers with the latest gold news and information.
Sophisticated investors employ several strategies based on the gold and silver ratio to optimize precious metals exposure and potentially enhance returns. Using the gold silver ratio to make smarter investment decisions is a well-established strategy. In fact, the gold silver ratio can actually be more useful in determining which precious metal is best to buy than spot prices alone.
Gold : Silver ratio
- Gold is seen as the most stable investment in times of economic uncertainty and is mainly used by investors, the jewelry industry and banks.
- When the gold-to-silver ratio is high, silver is likely undervalued, meaning that it might be a great time to sell.
- The general rule of trading still applies to precious metal stackers – buy low, and sell high.
- Unlike some investing metrics, the gold silver ratio is a direct expression of the value relationship between gold and silver.
Likewise, extraordinarily low gold silver ratios may trigger a silver sell-off as investors put their money into undervalued gold. 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.
- Each pair of adjacent integers has its own metallic mean, which is the collective name for the full set of roots that includes the golden ratio.
- Using the gold silver ratio to make smarter investment decisions is a well-established strategy.
- Many observers view this event as the moment when the U.S. dollar became a de-facto fiat currency, after which the role of governments in setting the price of gold and silver steadily declined.
- For long-term holders, it offers context for understanding market cycles within the precious metals complex.
Market News
In 1913, the Federal Reserve was required to hold gold equal to 40 percent of the value of the currency it had issued. A significant change occurred in 1933, when President Franklin D. Roosevelt suspended the gold standard to stem redemptions of gold from the Fed. This, along with other measures, weakened the link between the dollar’s value and gold.
The gold-silver ratio is affected by economic factors such as crude oil prices, stock market performance, global currency valuations and Treasury yields. These factors can impact the perceived value of gold and silver and, in turn, affect their ratio. In short, like any other strategy, trading the gold-silver ratio comes with risk, and it should be used carefully.
Magnesium Ingot Market: What’s Behind the 2025 Price Rise?
These numbers are related to the silver ratio as the Fibonacci numbers and Lucas numbers are to the golden ratio. During this period, silver rose from under $5 per ounce to over $20, outperforming most major asset classes as technology sector demand recovered and investment interest surged. Such 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. In this case, the investor could continue to add to their silver holdings and wait for a contraction in the ratio, but nothing is certain.
Many observers view this event as the moment when the U.S. dollar became a de-facto fiat currency, after which the role of governments in setting the price of gold and silver steadily declined. There’s an entire world of investing permutations available to the gold-silver ratio trader. What’s most important is that the investor knows their own trading personality and risk profile. For the hard-asset investor concerned with the ongoing value of their nation’s fiat currency, the gold-silver ratio trade offers the security of knowing, at the very least, that they always possess the metal. The difficulty with the trade is correctly identifying the extreme relative valuations between the metals. For example, if the ratio hits 100 and an investor sells gold for silver, and the ratio continues to expand—hovering for the next five years between 120 and 150—then the investor is stuck.
When using this strategy, a trader may buy gold when they identify the start of a potential uptrend in the ratio and sell when they identify a downtrend. This strategy assumes that the trend will continue, and the trader can capture gains by following it. Momentum trading is forex trading glossary, learn about currency trading a strategy wherein traders buy or sell an asset based on its upward or downward trend in price.