The phrase “gold silver ratio” has recently become a trending term for search engines like Google, Yahoo and Bing, but why? What is the gold silver ratio? And what importance does it have for us today?
The gold silver ratio can refer to a number of things. It can refer to the average number of ounces of silver that are mined for each ounce of gold that is mined. It can also refer to the cost of mining silver to the cost of mining gold. The gold silver ratio that most people have in mind when they hop online to perform a search, however, refers to the number of ounces of silver that would be needed to be traded for one ounce of gold.
For example, if gold is at $1,000 per ounce and silver is at $20 per ounce, the gold silver ratio is 50, because it would take 50 ounces of silver to equal the same monetary value as one ounce of gold. The current gold silver ratio is approximately 63, based on a gold spot price of $1372 and a silver spot price of $21.70.
The gold silver ratio has been as low as 15 at times, but that gap has widened recently due to the influx of gold derivatives investments. These investments allow investors both large and small to “buy gold” without ever actually taking delivery of said gold. Now that silver derivatives are becoming more well-known and gold derivatives are taking heat for their alleged lack of checks and balances, the silver spot price could outperform the gold spot price, lowering the gold silver ratio. What does that mean for silver bullion and coin investors? Hopefully, more profits while still retaining the safety of a physical investment that you can actually hold in your hands, as opposed to ETFs and mining stocks, mere paper and electronic promises, not real money.