Gold to Silver Ratio

[walesdave]

Hi All,

Put this in 'General' as it deals with both gold and silver so didn't know where else to put it....

I had a nice chat with a chap yesterday (he sells silver) and he mentioned the gold-to-silver ratio.

Obviously I know what it is (price of gold compared to price of silver) but could some-one explain why it is important, how you can make money from the way the ratio goes up and down etc.

Not looking for a detailed dose of economics, just an overview at the 'words of one syllable', 'Forest Gump' level that my brain works at

I understand there's a lot on the forum already about this, but most posts are quite technical and appear to be written for people who already grasp the basics of the ratio.

Many thanks

David 

[HelpingHands]

 

[sixgun]

As gold and silver come out of the ground the ratio is now something like 1:9 gold:silver. 

Historically the gold to silver ratio has been 1:15.

From a historical point of view, the current 60/70/80 to 1 ratio is grossly out of kilter. We know silver has been suppressed, the banksters have admitted it.

In the markets, i see the silver price being weighed on to lever gold down. There are traders who trade the gold to silver ratio. 

Some in the physical precious metal market will sell gold to buy silver when the ratio is high and reverse their positions when the ratio falls.

Silver has been wasted in past years whilst gold is kept safe. The past gold mined is mainly available. The past silver mined has been thrown away. 

If someone looks at this rationally especially with the critical industrial role of silver, silver is a screaming buy.

Other than shifting the proportion of gold and silver in your portfolio when the ratio moves to its extremes and realising silver in goodly amounts on a longterm basis is a good idea, i don't think i would bother with the ratio. 

[sovereignsteve]

Gold and silver tend to go up and down together but not necessarily by the same amount, therefore the ratio changes.

In the old days when silver was primarily used for coinage, the ratio tended to be stable and also reverted to the mean if it got too out of hand.

Some people say you can make money by buying silver when the ratio is very high and selling when it's low.

The trouble is, this presupposes that the future will mimmick the past. However, the changing uses for silver mean that this might not necessarily hold, ie silver is increasingly used for industrial purposes and very rarely for coinage.

Personally I think relying on historical patterns with this ratio could be dangerous.

[GoldenAtlantis]

This video is really good. He explains how you can get gold and silver for free by buying and selling at the right time.

 

[vand]

Always worth keeping an eye on asset ratios, not just gold:silver but all major commodities and assets. This time last year oil dipped its toe into the $20s and the Oil:anything ratio was in record territory when everyone was saying "$10 oil". Guess what? They were all about 500% wrong on that one.

Silver is a good buy right now, as it platinum. No guarantee at all that it will fully swing back the other way - long term trends exist for a reason, but even so when something is such an obvious "buy" based on its historic ratio to other assets then that is usually a good time to be buying.

 

[Roy]

I just can't get into silver.

I tried but with our American cousins paying 20% less than us, I felt as if I were on a road to nowhere.

I can understand the numi/semi numi angle, but pure bullion?

And is silver cheap now? It wasn't so long ago that spot was £9 and bullion was £12 oz inc ++

 

[breaktwister]

Roy I seriously doubt that we will ever see silver prices as low as £9 again.  This is below the cost of production for most miners, mining costs go up in the long run as wages go up and as all the "easy to get to" silver is mined making it more expensive to go deeper underground.  Basically, if silver spot was to approach £9 supply would fall dramatically and scarcity would push the price up again.

Silver is a bargain at today's prices.

Also, buy silver from Germany with no VAT while you still can.  Once the UK leaves the EU this opportunity may no longer be available.

[walesdave]

Many thanks for ALL the replies - I've got the basic theory of trading on the GSR to make 'free' precious metals.

GoldenAtlantis - great video, definately one for the beginner. I didn't appreciate the timescales involved before watching it!

I think I'll give trying to get rich quick off ratio trading a miss, my buy high / sell low stratgy is still going strong so any further opportunity to lose ££££ would just be too much of a temptation

FYI: I am probably going to buy a bit of silver from the chap I spoke to; he owns the safety deposit box depository where I just rented a box and some of the 1kg bricks he showed me did look very nice....just paying 20% VAT makes me want to cry

Cheers again

David

 

[vand]

More silver will be bought below 40:1 GSR than above it.

That's just the way mass crowd psychology works. Chase what has done best and buy it when it is more expensive instead of buying it when it is cheap.