Make Buy/Sell Decisions Using the Gold/Silver Price Ratio

By Mark Ferguson

The gold/silver ratio is an index that’s the oldest continuously tracked exchange rate in history.
It’s calculated by dividing the price of gold by the price of silver.
The 1792 Coinage Act of the United States set the gold/silver ratio at 15:1. This means that the
value of 15 ounces of silver was equal to the value of one ounce of gold at that time. That ratio
remained fairly steady until the United States was taken off the gold standard during the early
1970s.
After that time, the ratio has increased to an average of about 55 to 60:1, meaning 55 to 60
ounces of silver equaled the value of one ounce of gold. When the price of silver peaked at $50
in 1980, at the time the Hunt brothers tried to corner the silver market, the ratio fell to about
15:1, meaning that it was a great time to sell silver. Its price reached nearly $50 again in 2011, at
which time the ratio fell to about 30:1. Such low ratios point to a good time to sell silver in
relation to the price of gold.
Recently, after Trump rolled out his tariffs, the gold/silver ratio climbed to more than 100:1. This
ratio indicates it may be a great time to buy silver. For the previous six months the ratio ranged
between about 85:1 and 90:1. A similar trend emerged at the beginning of the pandemic with
the ratio soaring to more than 115:1. Since then, the price of silver has more than doubled.
As an investor, you can track the gold/silver ratio to determine whether silver is good value
compared to the price of gold. This can help you decide whether to buy, sell or hold. Just do a
simple search online for the gold/silver ratio and follow the source you like best.