Recently, I highlighted the gold/silver ratio and what it potentially meant for silver prices. So, what is the gold/silver ratio for those who don’t know?
4 March 2020 | HYCM – Throughout history people used both gold and silver as money, minting coins from these two rare and beautiful precious metals. That made the ratio of gold-silver prices a vital piece of information in everyday life because any big move away from more typical levels could cost you dearly if you took silver rather than gold coins as payment – or it could give you a windfall profit when the ratio moved back to its average!
What is the gold/silver ratio
The gold/silver ratio measures the relative strength of gold versus silver prices. It shows how many ounces of silver it takes to purchase one ounce of gold. To get this number, you divide the current gold price by the current silver price.
When you have done this you now have the gold/silver ratio. It is a simple way to see which of the two metals is gaining value relative to the other.
The meaning of the ratio
Whenever the gold/silver ratio rises, it means that gold has become more expensive compared to silver. The gold/silver ratio is at a twenty-year high after breaking out of the 94 level.
The ratio hits a 20-year high
Looking at the 20-year ratio you can see how much more expensive gold has become compared to silver. The Fed cut interest rates by 50bps yesterday, so the weak dollar should only cause prices to rise further. If you missed gold, silver is still hanging around the station.