Is the Gold:Silver Ratio relevant?

[365DaysofSilver]

Hello all,

So personally I think the GSR is a pointless chart when deciding if silver is over/under valued. 

I just uploaded a short video explaining some of my reasons for thinking this. 

Be interested to hear your thoughts 💭 

 

[Bigmarc]

Nice video.

I have often said that there was a point in history where silver has stopped being a precious metal and became a industrial metal. The problem then is, what is silver worth? Is it now overpriced as a industrial metal? Or under priced as a precious metal? My point being, if you were to look at copper. It was never a precious metal and the market has provided massive gains over the last 50 years. Silver on the other hand seems to be stuck between two markets and the gold to silver ratio is just one mechanism to understand what silver is worth. One sovereign is equal to one lb of silver. Now if it detached from gold and was let to run on its own I am not sure if I could work out what price silver should be, when to buy and when to sell. 

[sixgun]

The GSR doesn't measure what the average member of TSF is dealing with. The GSR measures the spot price ratio. As you correctly point out you can't buy silver coins near spot which you can gold.

You can buy / sell silver near spot but this would be using SLV and GLD or you could use something like the Kinesis Money exchange where KAG's (1 oz physical silver) are trading at around $18.50. There is no VAT, buy / sell prices are close together and trading costs are low. In these circumstances it is worth looking at the GSR b/c you are dealing at prices professions are dealing at. Professionals do pairs trading in futures contracts - they are trading the GSR. If they think silver is undervalued they will go long silver and short gold in the appropriate ratio. This is a very commonly used pairs trade b/c gold and silver are fairly tightly linked in the markets. You aren't likely to see gold doubling in price whilst silver goes down or does nothing. 

If you thought it worth it, a 1 oz silver /  gold coin ratio might be useful to plot and to follow. This would include taxes and premiums. This might reveal a ratio where being in or out of silver was beneficial. 

Edited October 16, 2022 by sixgun

[Paul]

A better ratio  to the man on the street is a 

1oz gold Krugerrand / Britannia Vs a tube of Britannia's dived by 25

The ratio is very different to the spot price ratio 

 

 

[sixgun]

2 minutes ago, Paul said:

A better ratio  to the man on the street is a 

1oz gold Krugerrand / Britannia Vs a tube of Britannia's dived by 25

The ratio is very different to the spot price ratio 

If the price of a Krugerrand were fairly steadily 5% over spot to buy in a shop and Britannias 40% over spot, then people who know how to manage charts could use the GSR to create the Gold Silver Coin Ratio. Then the GSCR could be automatically plotted using a GSR feed.

[MetalMandible]

While I wholly agree with the previous comments, if that GSR ever goes back to 120:1 or beyond, I already have the bullion picked out that I would trade in for a big ol heap of silver...

[sixgun]

5 minutes ago, MetalMandible said:

While I wholly agree with the previous comments, if that GSR ever goes back to 120:1 or beyond, I already have the bullion picked out that I would trade in for a big ol heap of silver...

The problem is, when the GSR did briefly go to 120:1 in March 2020 where could you get silver at $11.50 or whatever it was?
As i remember physical disappeared and price went up very rapidly - we saw silver in the high £20's after being in the mid teens for quite some time.
A move to 120 would more than likely be very brief. Physical would disappear off the shelves and dealers will not part with it at silly prices. 
If you want to capitalise on a spike move, if it happened, i think you would need to trade paper - i think maybe even spread betting.
Then when price recovers take your profits and put them into physical in a controlled considered way.

[MetalMandible]

3 hours ago, sixgun said:

The problem is, when the GSR did briefly go to 120:1 in March 2020 where could you get silver at $11.50 or whatever it was?
As i remember physical disappeared and price went up very rapidly - we saw silver in the high £20's after being in the mid teens for quite some time.
A move to 120 would more than likely be very brief. Physical would disappear off the shelves and dealers will not part with it at silly prices. 
If you want to capitalise on a spike move, if it happened, i think you would need to trade paper - i think maybe even spread betting.
Then when price recovers take your profits and put them into physical in a controlled considered way.

I see what you're saying and I agree.  But there are ways of taking advantage still.  Private transactions are always an option and I know of a reputable bullion dealer that will straight up trade metal for metal - no cash needed.

[LawrenceChard]

On 16/10/2022 at 13:49, Mothballjim said:

Is the Gold:Silver Ratio relevant?

Hello all,

So personally I think the GSR is a pointless chart when deciding if silver is over/under valued. 

I just uploaded a short video explaining some of my reasons for thinking this. 

Be interested to hear your thoughts 💭 

 

Is the Gold:Silver Ratio relevant?

Yes.

But it is not a panacea to answer all questions such as the meaning of life.

https://www.chards.co.uk/gold-silver-ratio

😎

[Earthmetal]

Speaking as a newbie, it appears the ratio is far more important to the U.S.
I can see how 'playing the ratio' can increase your silver without paying a penny. I struggle to see it's relevance in Britain, as our prices can show the opposite trends to America due to exchange rates etc. This makes the ratio difficult to utilise in Britain in any meaningful way, it would seem.