Buying gold, silver, and other commodities has been commonplace in standard markets for years now. While the methods and practices for executing commodity deals have changed over time, the relationship between gold and silver as one of the main commodity investments and trading vehicles in the modern market has given rise to the measurement for this specific market: The Gold-Silver Ratio.
The Gold and Silver Ratio
The Gold and Silver ratio is essentially the measure of the current gold price versus the current silver price. Essentially, it measures how much silver per ounce in relation to gold’s price per ounce, measuring as
Gold Price / Silver Price .
Making Use of the Gold and Silver Ratio
The Gold and Silver Ratio allows investors to properly measure the relationship between the prices in order to make investment decisions about current and future prospects. It allows hedging of investments when an investor chooses to invest in one metal over another.
For example, if the Gold-Silver Ratio is at 50:1, where gold is priced at $1,000 an ounce and silver is at $20 an ounce, investors looking at a lowering ratio (for example, to 48:1) can short-sell gold while purchasing the same amount in silver. This allows investors to realize a profit if their prediction is correct regarding the ratio rather than the specific price of either metal.
The current Gold-Silver Ratio stands at 78.54:1, with a YTD High of 80.79 and a Low of 64.16. For gold, where the price per ounce is currently at $1,828, bullish momentum is expected. Prices are projected to reach a resistance level of $1,831, while possibly pushing towards $1,873 and $1,908 an ounce.
Silver is also showing slightly bullish momentum, currently at $23.29 an ounce, with the previous resistance at $21 indicating investors may want to push prices towards $24 or $25 price levels.
These projections can indicate a moment towards higher Gold-Silver ratios of 79.60:1 if the prices remain relatively stable at these current levels. But with the increasing prices of both silver and gold, expect the ratios to stay roughly within the high 70 levels.
As with any investments, make sure to properly ascertain your own risk levels and portfolio balances before making any material financial decision. While general research may show certain signals towards specific performance, ensure you keep your investments diversified to avoid overexposure to a single asset (or in this case, two assets).
Note: Please do not invest money or assets in the financial markets that you cannot afford to lose. This article should not be construed to be investment advice and is for information purposes only