Gold/Silver Ratio

While the rest of us are playing with electronic numbers on the stock exchange, there are still those out there who just love to dabble in hard commodities like silver and gold (the “gold bugs”), which is no surprise given that money used to be backed by the silver or gold standard. Ah, the good ol’ days.

The gold/silver ratio is a measure at a given point in time of how much silver it would take to buy one ounce of gold. While you might know modern investors who dismiss the usefulness of the gold/silver ratio, as it’s ooollllddddd, the numbers show that it’s a solid basis for many money-winning trading opportunities and strategies.

If a gold bug had 10 ounces of gold and the gold/silver ratio rose to 100 (which is super high), the gold bug could become a silver bug, trading in 10 ounces of gold to get 1,000 ounces of silver. 100 is the highest the ratio has been, which was in the early 90s, and it’s been as low as 17 only a decade before in the early 80s.

Let’s play gold-ball.