What Might the Gold/Silver Ratio Be Telling Us?
The gold/silver ratio is a simple equation that gauges the price of gold relative to the price of silver, and vice-versa. The equation goes like this: How many ounces of silver does it take to buy one ounce of gold? In other words, take the current gold price and divide by the current silver price. The answer is the current gold/silver ratio.
For example, today’s gold price of $1899 per ounce divided by today’s silver price of $23.93 gives us a gold/silver ratio of 79.36.
In other words, you need almost 80 ounces of silver to buy a single ounce of gold.
Now that we know what the current gold/silver ratio is, what might it be telling us?
It may be telling us that silver represents an excellent current value in relation to gold.
Consider this: Over the last 10 years, the gold/silver ratio has been as low as 31.68 and as high as 83.73.
At current levels, this ratio is near the highest level documented in the last decade.
Could the gold/silver ratio continue moving higher, exceeding the highest level seen in the last 10 years? Sure.
Could the gold/silver ratio retreat from what might be considered elevated levels? Sure.
While anything is possible, the current reading could potentially be telling us that silver represents a better long-term value at current price levels.
Are we saying that gold is not a good value? Absolutely not…
What we are saying, however, is that silver could potentially be considered “cheap” right now compared to gold. This means that buying silver at current levels could potentially see a higher percentage return compared to gold if the ratio begins to contract.
It’s all about relative value.
If you are looking to stretch your investment dollars as far as possible, the gold/silver ratio can potentially be a useful tool. A very simple method for using this ratio is buying silver when the ratio is high or appears stretched, and buying gold when the ratio narrows or appears tight.
Fortunately, this does not need to be an exact science as we believe that buying gold and silver at any price or any ratio level is still a wise investment. It should not be used as a means of “trading” gold or silver either, but rather seeing what may present the best value at current price levels.
While we believe that the gold/silver ratio may show that silver is the better current value, we also believe silver is an awesome value at current prices. Silver can be purchased right now for almost 70 percent off from its all-time high price. Could silver return to those all-time highs or even exceed those levels? We certainly think so.
Don’t wait for silver prices to go up from recent levels. Act now to acquire physical silver at what could potentially be a huge discount. Speak with an Advantage Gold account executive today. Our precious metals professionals will discuss your options for acquiring physical silver and can even show you how to conveniently use your IRA account to build a physical silver portfolio.
Talk to an IRA advisor about how to roll over your 401(k) into a Gold IRA by opening a self-directed IRA account, contact us or call us at 800-341-8584 today.