Gold to Silver ratio?? WTHeck is best???

Discussion in 'Bullion Investing' started by HardTruths, Jun 7, 2016.

  1. HardTruths

    HardTruths Member

    Hello All, I know it's subjective, and from what I have read and researched there are many different opinions. As I type this the ratio of gold to (1243.57 oz) / silver (16.34 oz) is 76 to 1.. I might as well get to the question. Does anyone have an opinion on what they think is the best ratio to adhere to?

    I understand that nobody has a crystal ball and conditions can change in a second. I am just looking to for opinions from members here that have much more experience than I do. Hopefully, I can learn a little and put together some sort of guideline or framework in purchasing gold, silver, or any other precious metals. Thanks all..

    p.s. I think it may be important to mention that my plan is to purchase monthly. Whatever I am fortunate enough to accumulate would be used as a down payment for a house in 8-10 years.. Thank You in advance to all of those who take the time to reply.
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  3. smarch

    smarch Active Member

    A lcs owner advised me 8 years ago that we should see a closer to 50:1 ratio eventually. Hasn't happened, but it would be interesting to see what the ratio has been the last 200 years.
  4. John King

    John King Member

    If you have an 8-10 year time frame I think you would be better to dollar cost average buying the S&P. In my experience from looking at 100 year charts you need to be able to hold your gold or silver for 30-40 years to hit a bull market and then sell when everyone else is buying. This is hard to do but look at 2010-11 when gold and silver soared and now down 40% at least. We may wait another 30 years for another bull market like that. I see precious metals as insurance against financial meltdown not as a good short to intermediate investment. A good long term investment if you think in terms of 30-40 years dollar cost averaging all the way. This is true with stocks, houses, art and everything else. I buy silver and gold coins just because I like them and not as an investment. The best investment is entire US stock market.
  5. -jeffB

    -jeffB Greshams LEO Supporter

    That's an odd perspective on the chart, in my opinion.


    The silver price chart over the past 200 years is dominated by the huge spikes around 1980 and 2011. Besides that, there was a significant event in the early 1860s -- might have had something to do with politics ;) -- one in the late 1910s, one coming out of the Depression in the 1930s, one in the mid 1940s (politics again), one in the late 1960s, one around 1983, one around 2008... you get the picture.

    We tend to ignore little booms that happen in the shadow of the big spikes, but they do happen. And as for extrapolating a period of repetition from just two events -- well, it's better than extrapolating from one event, but not by much.

    But I'm indulging in chart-augury, something that I tend to make fun of when other people do it. Charts aren't causes or predictors, except when enough people believe that they are (and stake money on that belief).

    Edit: I do agree about DCA into a major stock index being a better choice, even after watching my retirement portfolio drop by about half in 2008 -- I'm not retired yet, so I let it sit, and it quickly regained its losses and then some. And the money I put in during the dip multiplied very nicely.
    HardTruths and mac266 like this.
  6. medoraman

    medoraman Supporter! Supporter

    The gold to silver ratio is a relic of when both were used as monetary metals.

    Is 16 to 1 or 12 to 1 a relatively safe number to guesstimate recoverable reserves? Probably. Does this matter anymore? No. The demand for the two metals are no longer interchangeable like they were when both were used in coinage. The reason the ratio has gone up is because most of the newer demand for PM is ONLY demand for gold, not silver. Central banks ONLY have gold reserves, (silver too bulky). Asian and Middle Eastern demand is ONLY for gold as jewelry and investment.

    So, while silver is a better industrial metal, I anticipate the gold/silver ratio to remain high since they really have nothing to do anymore with each other, and most new pm demand around the world is only for gold.

    Do I own both? Yeah, but that is because I have always loved the look of silver personally. Gold to me is too garish.
    HardTruths, Gipper1985 and saltysam-1 like this.
  7. saltysam-1

    saltysam-1 Junior Member

    I think even in a desaster neither will do well. Direct trading will provale. Who would give away security for a few chunks of metal? I wouldn't.
  8. Blaubart

    Blaubart Melt Value = 4.50

    I only look at recent history (20 years or so) to see if the ratio is up or down from 'normal'. Too many other factors involved when you look back further.

    I mostly have silver right now. If the ratio goes down, I will likely trade silver for gold. There is no magic number for me, but the lower it goes, the more I'll trade.
    HardTruths likes this.
  9. HardTruths

    HardTruths Member

    Provident had a decent article explaining historical ratio's and also some of the reason why they bounced around, etc.. to answer your question this is what I read.

    "Since 1687 – as far back as the records reach – the gold-to-silver ratio vacillated between roughly 14 and 100".

    and from the same site

    "Throughout the twentieth century though, the gold-to-silver ratio has averaged about 47-50 and has fluctuated wildly at times".
  10. Speedbump

    Speedbump Not a New Member

    Which ratio are you talking about? The price ratio or your holdings ratio? Its a subjective questions either way and I am not sure if there really is a "best".

    With respect to price, the higher the ratio, the cheaper silver is relative to gold. Some say this means trade for, or buy silver. When the price ratio drops, silver is relatively expensive so you should trade for, or buy gold instead.


    With respect to the ratio of your holdings, that just depends on what you like i suppose. I try to keep a 1:100 ratio gold to silver. Some people are all silver, some are all gold.
    HardTruths likes this.
  11. HardTruths

    HardTruths Member

    I agree that the stock market may be a better investment, especially since I am dollar cost averaging. But, I am worried about security and truthfully, I do not trust the financial markets. Having said that, when I am done with school and get a decent job I plan on investing in a 401K. I just do not want to take any risks with what I invest now. Gold or Silver will give me some security, and at the very least it will be in my possession and under my control to do with as I please.
  12. Clawcoins

    Clawcoins Well-Known Member

    I don't understand the desire to follow some ratio ?

    Gold and Silver prices are independent of each other. 20 years ago they were more in sync, but until a few years ago there was a ratio between Platinum and Gold too. It used to be fairly spread, then but now that is upside down. So go figure !!

    It's nice to own silver and gold though.
  13. -jeffB

    -jeffB Greshams LEO Supporter

    All this advice about trading gold for silver makes two basic mistakes:

    1) It assumes that the "real" or "natural" or "long-term" ratio is somewhere familiar -- in the chart above, 50:1. That's not a sure thing. For the reasons @medoraman mentioned, and others, the ratio may stay much higher until all of our grandchildren (yet unborn in my case) are dust. Or both prices may shoot through the roof (like in 2011/2012), or fall through the floor, in which case it hardly matters which you're holding.

    2) In the real world, "trading gold for silver" usually means selling gold at a dealer's buy price, and buying silver at a dealer's sell price. This is great for dealers -- swap early, swap often! -- but not so much for someone trying to "preserve wealth". Every time you trade, you're effectively paying a commission to your counterparty. Better, in my opinion, to hold what you've got -- or to adjust your ratio by just buying silver or selling gold, or vice-versa, depending on what adjustment you want.
  14. John King

    John King Member

    The only secure financial asset is a bank account FDIC or a treasury bill or note. Stocks are not secure. Bonds are secure in the sense that if they are government bonds you get the money back at the end of the term. Gold or silver is about the most insecure asset I can imagine. You have to pay a commission to buy and sell it. You have to store it securely. The prices swing wildly. Real Estate is not a secure investment except after 30 years of payments you have a rent free place to live. 2007-9 showed that housing prices can crash and what's worse if most of us buy them on margin. You put down 10% or 20% and you can lose it all if you can't pay your mortgage.
    Starting at age 25 and putting 10-15% of your income into stock market has worked for those who sit tight until 65 and then take it in increments as in an annuity perhaps. Almost nobody does this because when you are 25 you have other fish to fry and retirement seems a dream. I think if you bought gold and silver the way you might buy stocks that could work for you, but the spikes are more extreme.
    Pensions used to be secure but now most companies don't even offer them and SSA age will probably be raised to age 75 in the future. You just have to pray that a rich relative dies and leaves you some money or a great coin collection.
    HardTruths and Bman33 like this.
  15. PeacePeople

    PeacePeople Wall St and stocks, where it's at

    Are you trying to use the gold/silver ratio for trading advantages? IE buy silver when it's high and then trade the silver for gold when it's low? Are you wondering what kind of ratio you should hold? Do you have a belief that one will outperform the other?

    I will tell you that I'm heavy on silver now, as I plan to trade it for gold when that ratio, or if that ratio gets into the 50 range. That's my plan and it may not be a good idea for you.
    HardTruths likes this.
  16. John King

    John King Member

    Buy silver when it is high and trade for gold when it is low? In last two big precious metals moves gold and silver moved in tandem. Gold hit record highs while silver hit record highs. I don't see silver or gold prices so low that you can back the truck up to the mint and load up on either metal. Just in 2003 silver was selling for $7.50 an ounce. It is more than twice as high today and gold was selling for a couple of hundred bucks an ounce in early 2000 I think and today is sells for $1250 an ounce. If you have time you could dollar cost average in buy silver or gold to the extent of 5% of your total assets. Beyond that you might as well throw the money out the window. The gold/silver ratio means nothing to an investor. To a trader it means you will probably lose money just on the expense you pay to trade the commodity. The metal that has not really moved is platinum and I don't know why?
    HardTruths likes this.
  17. Blaubart

    Blaubart Melt Value = 4.50

    Here's another way to look at it.

    If a person has dollars, and they want to buy gold or silver, they likely want to wait for the price of gold or silver to be relatively low before they buy. They don't want to buy when the price is high.

    Now, think of USD as a commodity. The gold to silver ratio is very similar in nature to the gold to dollar ratio. Yes, the values of gold and silver are independent in many regards, but then again so are the values of gold and dollars.

    If one has the flexibility of trading between gold, silver, and dollars, why would it make sense to only focus on the values of gold to dollars, or silver to dollars?

    If the GSR drops to 38, why not "trade" silver for gold? Of course I'd probably want to investigate why the value of gold fell or the value of silver rose, and speculate on what I think they will do in the future, but at 38 I could essentially get twice as much gold for my silver as I can today.

    In the end, IMHO, the GSR is as valuable of a buy/hold/trade/sell indicator as the spot prices of gold and silver. People often say they'll buy an ounce of gold (with USD) if it falls below $x/oz., or they'll sell silver (for USD) if it goes above $x/oz.. In the case of selling silver to buy gold when the GSR falls below a certain number, just think of it as you're using silver (instead of USD) to pay for gold.
    HardTruths likes this.
  18. John King

    John King Member

    I think I see your point. You must factor in the commission you pay when you trade silver for gold. A lot of profits get eaten up with trading costs. Since the gold to silver ratio is 76 why not use gold to buy silver since the prices are so out of whack now. I am not a trader. Every time I have attempted to trade assets of any kind I usually lose in the short term at least. There is nothing wrong with taking profits off the table be they in gold, silver or USD.
    HardTruths likes this.
  19. baseball21

    baseball21 Well-Known Member

    My opinion on the gold to silver ration is that there is no such thing and not something anyone should be concerned with. They are independent metals that trade independently of each other. They're both just a commodity now whose only real relations is that they both kind of go up or down together depending on how the metal market is moving.
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  20. saltysam-1

    saltysam-1 Junior Member

    It's like trying to figure out the relationship of gasoline to the U.S. dollar. It never matches up exactly. Why would it?
    HardTruths likes this.
  21. baseball21

    baseball21 Well-Known Member

    Exactly. People trying to correlate the two generally have a financial interest in selling you one or the other as under valued.
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