The Gold-to-Silver Ratio: What is It and Why Does It Matter?

If you’re in the precious metals investing space at all, you’ve likely heard of the gold-to-silver ratio. It’s commonly thrown around, especially in regards to buying and selling gold and silver bullion.

But what exactly is the gold-to-silver ratio, and why does it matter? The answer to these questions will help you in your bullion investing journey, and make you a smarter investor, whether you’re looking to buy or sell!

Ready to invest?

We sell high-quality gold and silver bullion for all your investing needs.

What is the gold-to-silver ratio?

The gold-to-silver ratio is how many ounces of silver it takes to buy one ounce of gold.

So, let’s say the silver-to-gold ratio was 60:1. That means it would take 60 ounces of silver to buy one ounce of gold. Silver is always valued less than gold, so it will always take more ounces of silver to buy gold (as opposed to more ounces of gold to buy silver).

You can easily find the gold-to-silver ratio by dividing the price of gold by the price of silver. So, using the price of gold from May 19, 2020:

$1,752.75 (price of gold) ÷ $17.52 (price of silver) = 100 gold-to-silver ratio

The average gold-to-silver ratio usually hovers somewhere between 40–60 to 1, although gold prices have increased by a lot recently due to the coronavirus pandemic. Historically, in the time of the Romans and in the 18th century, it skewed much lower (12–15 to 1).

How is the gold-to-silver ratio used in bullion investing?

Many people use the gold-to-silver ratio in determining when to buy or sell their gold or silver. Because it’s an indicator of both silver and gold’s individual prices, as well as the relationship between the two, investors might decide to sell their gold to buy more silver or vice versa, depending on the ratio.

When the ratio is high (as it is now, at 100:1), silver is favored as an investment as it will be much cheaper than gold, so it’s a good time to invest. When the ratio is lower (15:1), the spot price of gold is lower, so that will make a better investment.

Why does the gold-to-silver ratio matter?

If you’re trying to gauge whether the price of gold or silver is higher or lower than usual, this ratio can be a great place to help you understand how gold and silver prices relate to each other, and when the best time to buy either gold or silver is.

And, as stated early, many investors gauge their investments by the gold-to-silver ratio, so it matters greatly for those who invest that way. Especially for savvy investors who are looking to diversify their portfolio, this ratio becomes especially important in balancing their investments.

It’s worth noting that, while the gold-to-silver ratio is a good indicator of prices, it can fluctuate a lot, making it difficult to use as a solid gauge for investing. If you’re skilled at short-term investments, you’ll likely have success, but if you’re newer to bullion investing, you might be better off doing more research.

Have Questions?

With over 100 years of combined experience in the precious metals industry, our account executives would love to help you find the perfect coin for your collection. We’re passionate about bullion investing and coin collecting so email or call us for any assistance! 

Ready to invest?

We sell high-quality gold and silver bullion for all your investing needs.