Gold to Silver Ratio

Understanding the gold silver ratio is one of the better ways to accumulate wealth over time by way of precious metals. The main reason this strategy is beneficial is because it sets a fundamental approach to your bullion stacking endeavors. Most people view gold bullion as the foundation of their investment with the gold silver ratio being what they use to get there.

If we look historically at the gold silver ratio that our earth gives us, generally it is a ratio of 15:1 meaning for every 15 ounces of silver we pull out of the ground we get 1 ounce of gold. This means that in a perfect market you should be able to take 15 ounces of silver to any dealer and receive 1 ounce of gold or vice versa.

For the past several years the gold silver ratio has fluctuated between 55-64:1 and at the time this page was written (04/30/2015) the ratio was 73:1.

How does the gold silver ratio help investors?

One of the more frequent questions that we get asked is should I buy gold or silver right now? This is where we generally educate clients on the gold silver ratio. Lets take a look at an example.

Back in 2010, during public hyperinflation fears due to the Federal Reserve’s monetary policy known as “Quantitative Easing”, the price of gold was around $1,000 an ounce and the price of silver was hovering at $16 an ounce. This puts the gold silver ratio at this time around 63:1. After the huge bullion market run up that ended in May of 2011, the price of gold got to $1,814 per ounce while silver reached $49 for a ratio of 37:1.

For the bullion stackers that played the ratio game right they would have had almost twice as many ounces of gold than they had started with had they converted their silver back to gold. With gold being more stable in price than silver, the gold to silver ratio player would have traded back into gold to weather out the price decline. Now that the ratio is back to 73:1 the bullion stacker might consider converting a portion of his or her gold back into silver so that they are ready for the next leap.

Or course when playing the markets it is very rare that anyone hits the top or bottom of the market exactly. Because of this it might be wise to transfer a portion over time as you see the gold to silver ratio moving in your favor.

Always remember that bullion stacking for wealth building is about the long game. History tells us that no matter what, fiat currencies always return to their intrinsic value of zero. Owning precious metals is your way of mitigating that risk of wealth loss due to inflation.

Questions? Contact us!