Precious metals investors have plenty of good reasons to buy both gold and silver. But is either better than the other? And is now a “better” time to buy gold, silver, or both?
Some traders and investors look to the gold to silver ratio to track the ratio between these two metals. This informs their trading and investing decisions – but is it worth paying attention to?
The gold to silver ratio is simply the number of ounces of silver it takes to “buy” one ounce of gold. In other words, it’s how many ounces of silver you’d need to swap out for one ounce of gold, given current spot prices for both gold and silver.
(It’s also known as the silver to gold ratio – which actually makes more logical sense given how it’s typically listed. Nonetheless, the term “gold to silver ratio” is far more commonly used than “silver to gold ratio”).
The gold/silver ratio ignores bullion premiums and looks more generally at spot market prices for each metal.
To calculate the gold to silver ratio, you can simply divide the price of gold (in dollars) by the price of silver (in dollars).
To illustrate, let’s look at two examples:
The ratio has been in the 70-90 range over the last few years, though historically it’s been as low as 15 and as high as 110+.
As of November 17th, 2023, the gold to silver ratio is 83.5 to 1.
At the time of this writing, silver spot was $23.72, and gold spot was $1,981.10.
Gold has performed very well recently, even approaching an all-time high in 2023. Silver spot has been lower, resulting in a higher gold to silver ratio.
Over the last 30 years, the gold to silver ratio has ranged from a low of around 35:1 all the way up to 111:1. That’s quite a range!
That means at the low point (in 2011), you could have swapped just 35 ounces of silver for an ounce of gold. At the high point (in 2020), that same ounce of gold could have been swapped out for 111 ounces of silver.
The gold to silver ratio is just one metric that investors look at when it comes to precious metals. The main ways that investors use the gold/silver ratio are:
Buying decision making: People who regularly purchase gold, silver, and other precious metals may use the G/S ratio to decide which precious metal is currently a better value, compared to long-term trends. If the goal is to maximize total ounces of precious metals, there is some logic in buying whatever is “cheaper” at the moment.
Trading opportunity: Other precious metals investors actively swap gold and silver to play the ratio between the two metals. Theoretically, this could allow someone to increase their total holdings over time, without additional investments. For instance, say you start with 1 ounce of gold. You swap it for 85 ounces of silver when the ratio is 85:1. Later, the ratio returns to 80:1, and you swap your 80 ounces of silver back for 1 ounce of gold. Now, you have 1 ounce of gold and 5 ounces of silver – and you haven’t invested any additional dollars in your stack.
A valuation metric: The g/s ratio compares the values of two hard assets. For people that prefer physical hard assets over fiat, it can be useful to compare the price of gold to other hard assets, like silver or even other commodities.
The gold to silver ratio is just one of many metrics that investors would be wise to monitor. Some people swear by the benefits of watching this ratio, while others discard it as practically useless.
The price of gold is influenced by dozens of factors, from global events to industrial demand. Silver is similarly influenced by many factors. Watching the gold to silver ratio gives you a bit more context for the prices of both, but it doesn’t necessarily tell you which is a “better deal”, or which might be rising or falling in the future.
With that said, if your goal is to maximize the amount of precious metals you own, playing the gold to silver ratio is potentially worthwhile. Whether you choose to actively trade gold and silver when the ratio is right, or just buy whatever’s comparatively cheaper, there’s potential there for the ratio to be useful.
Whether you’re looking to buy, sell, or trade, Bellevue Rare Coins is the premier precious metals destination in the Pacific Northwest. We have the lowest premiums on gold and silver coins, bars, and rounds, and our friendly staff is here to serve you 6 days a week in Bellevue, Lynnwood, Issaquah and Tacoma.
Whatever your investment and stacking goals are, Bellevue Rare Coins is here to help. Get in touch today or stop by one of our stores!