Gold Silver Ratio

Let us begin this analysis with a clear explanation of what the Gold-Silver Ratio is.

Gold Silver Ratio - (n) the dynamic moving amount of silver one can theoretically buy with a fixed amount of gold. Typically in the western world, the gold to silver ratio is measured in the number of troy ounces of silver one can acquire with one troy ounce of gold. Although it can also get estimated in equivalent sizes of bullion weights: grams, kilos, tonnes, etc.

Many modern-day gold and silver bullion buyers and traders use the fluctuating Gold Silver Ratio to determine which precious metal may be poised to outperform the other.

For example, we will examine times the Gold Silver Ratio has fallen above or below its 20th and 21st Century averages or longer, which will show you in various longer-term Gold Silver Ratio charts below.

Depending on their outlook, time horizons, and beliefs, physical precious metal savers may want to buy more gold or more silver depending on whichever may appear to be more undervalued to the other.

In terms of geologists, we find roughly 8-parts of silver to 1 part gold in the ground. Silver and gold's historic monetary ratio has typically averaged around 16 has little if nothing to do with how they are valued today. Remember that silver has been divorced from the modern financial system since 1964.  

Only produced by star explosions, the lacking precious supply of both physical silver and gold bullion is one significant attribute to its enduring value. There are of course many trillions of other reasons the world saves silver and gold for wealth preservation and even appreciation at the right timeframes.

Extreme privacy between the two bullion types is just one additional attribute they both share.

Gold Silver Ratio Volatility

Throughout documented history, the Gold Silver Ratio has varied widely. 

Often what happens in bullion bull markets, gold tends to outperform silver in the beginning acquisitions phases. Silver historically plays catch-up and outperforms gold in a more speculative environment, when the average 'man on the street' and even high net worth investors begin choosing silver bullion over gold bullion allocations.

Look back to the bull markets of both 1980 and 2011 for illustrations of these stated facts. And no older-timers, it was not merely the scapegoated Hunt Brothers silver speculations that caused virtually all commodities to multiple in US dollar values many-fold throughout the 1970s.

When silver performs best versus gold in recent history is often during timeframes in which fiat currencies and their enduring values are most acutely called into question by the investing masses. Many bullion buyers, including ourselves, believe another era of fiat currency faith loss will come to fruition soon enough.

Over the last few centuries, the Gold-Silver Ratio has gotten either fixed by authoritative government decree, their central banks (e.g., Bank of England, Federal Reserve) or even heavily influenced by commodity futures contract price discovery markets (e.g., from 1974 to today's version of the CME Group's COMEX).

The Gold-Silver Ratio has been as low as 2.5 oz of silver to acquire 1 oz of gold (ancient Egypt). The Gold-Silver Ratio has gotten as high as over 100 oz of silver to buy 1 oz of gold in the 1930s as the US government forced US citizens to turn in their gold coin savings.

The following chart covers the past 300 years of the Gold-Silver Ratio.

 

Gold Silver Ratio 300 Year Chart

What happened with the Gold-Silver Ratio following the US Civil War?

What happened with the Gold-Silver Ratio following the confiscation of US Citizen's private Gold and Silver (1933 / 1934)?

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Gold Silver Ratio 70 Year Chart

What caused the lows in the Gold-Silver Ratio in the years leading into 1968, in early 1980, beginning in 2010 and into the year 2011 respectively?

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You can learn more about the respective fundamental investment factors for both gold investing and silver investing here at SD Bullion.

Given the way both the silver spot price and gold spot price are currently mainly discovered by dominating synthetic derivatives at this moment in time, it is not really until lessening supplies vs. increased demand factors exacerbate, do we often historically see the Gold Silver Ratio drop sharply.

The last significant example of this was from 2009 to the 2011 timeframe in which physical bullion buying at the margin forced the Gold Silver Ratio sharply downwards reaching levels as low as 32 or 33 depending on the derivatives one uses to measure by.

Of course, one doesn't have to look far to find what may sound like ridiculous gold price predictions. Often many are arithmetically based on historical US dollar monetary base outstanding precedent. Every 50 years or so the US dollar issuance outstanding gets accounted for by Official US Gold Reserves. We believe we are on track for another historic beat down of the fiat US dollar by gold 2020s.

If for example the spot price of gold were to hit $5,000 oz USD and the Gold-Silver Ratio tightened to its multi-millennia and naturally occurring near the ground averages, the world could simultaneously have silver spot prices well above $100 oz USD.

The following logarithmic format chart has possible projections for future Gold Silver Ratios moving into the 2020s.

The yellow line tracks the ongoing fiat US dollar price of gold in this 21st Century bullion bull market (see left axis).

The red line tracks the ongoing Gold Silver Ratio ongoing in this 21st Century bullion bull market (see right axis, used for both the continuing ratio and the US dollar silver price).

The gray-colored line tracks the ongoing fiat US dollar price of silver in this 21st Century bullion bull market (again see the right axis).

The following logarithmic format chart has possible projections for future Gold Silver Ratio potentials moving into the 2020s.

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Gold Silver Ratio Potential Future Chart

 

Logarithmic scale charts like the one above are nonlinear scales often used when there is a broad range of quantities like we have for various potential Gold Silver Ratio levels ahead.

This chart is scaled, so the same vertical distance represents the two equivalent percent changes on the table (e.g., $50 oz to $100 oz silver vs. $100 oz to $200 oz silver both represent 100% increases thus they take up the same amount of space on the chart).

Many bullion buyers today fully expect gold and silver bullion to continue their 21st Century Bull Markets and possibly each respectively reach five and triple-digit fiat US dollar values per troy ounce within the coming decades.

You can learn more about the 5,000 year Gold Silver Ratio history by clicking here. Learn how ridiculously low the Gold Silver Ratio was before the industrial revolution made mining for most often by-product silver, more accessible now than it was in the long-dated past.

As well, we have written about what the Gold-Silver Ratio is in general, including a practical guide to how some gold and silver bullion buyers and investors use it when buying their bullion.