Capture Relative Moves: Gold vs. Silver

1. The gold-to-silver ratio is trading around 81. Although that’s already a decline, it previously fell to around 64 in 2021 and 2016, and even to 31 in 2011. Each time the ratio drops, it typically marks a peak in silver prices during an uptrend.
   
   
2. Therefore, now is just the beginning of a new down-cycle in the ratio. (Usually, the ratio decreases when precious-metal prices rise.)
   
   
3. Over the past decade, the gold-to-silver ratio has mostly ranged between 40:1 and 80:1. Readings above ~80 often imply silver is undervalued relative to gold, while below ~40 can suggest gold is undervalued.
   
   
4. Looking back about a century, the ratio was frequently anchored near 16:1 under bimetallic standards, though it has varied over time.
   
   
5. Beyond gold’s monetary/jewelry premium, a key driver of silver’s lower price per troy ounce is supply: annual silver mine output is typically 6–14× that of gold, depending on the year.
   
   
6. In any case, the current ratio of around 80 is considered high.
   
   How to use the ratio effectively
7. Many investors treat it as a rotation signal between gold and silver. A common approach: buy silver when the ratio is high (typically ≥80:1) and buy gold when the ratio is low (thresholds depend on your preferred lookback).
   For illustration: with gold near 3,900 USD per troy ounce, a move in the ratio to 40:1 would imply silver around 97.5 USD per troy ounce (≈double today’s level).
   
   
8. You can also construct a synthetic spread by pairing the two: long silver (XAGUSD) and short gold (XAUUSD) for equal notional value. It’s crucial to match contract size on both legs and rebalance when prices move beyond your tolerance.
   

Analysis by: Krisada Yoonaisil, Financial Markets Strategist at Exness