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Last Updated on 07/21/2024

The Gold to Silver Ratio

Silver's Relationship with Gold

Silver's market is far more volatile than gold.

Gold is a low-risk asset; about ninety percent (90%) of gold's demand comes from safe-haven investment sectors (jewelry, bullion, and ETFs), which causes its price to be less volatile.

Whereas, among investors, silver is known to be much more volatile than gold, sixty percent (60%) of silver's market demand comes from industry, and the rest of its demand comes from safe-haven investment sectors.

Overall, silver's price mimics gold's price movement, but because of its industrial demand, its price is more violent, as seen in the chart below. (click chart below to enlarge or click this link)

(Click Chart to Enlarge)

chart provided courtesy of TradingView.com

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Interpreting
the Gold to Silver Ratio

The "Gold to Silver Ratio" represents the number of silver ounces it takes to buy one ounce of gold.

Those who want to invest in silver and receive the greatest return should pay attention to the gold-to-silver ratio.

For those who want to invest in silver, when the ratio is above 60, it is a good sign to buy silver, but when it is above 80, it is an extremely good time to buy silver to get a better return. (click chart below to enlarge or click this link)

(Click Chart to Enlarge)

Note:  All the charts, commentary, and information on this page are in no way an incentive from this guide for how you should invest or divest.

Silver's Historic Relationship
with Gold

In the late 1100s (A.D.), a "Silver Rush" took place in Europe after better mining techniques opened newly discovered silver deposits.

The rush of silver in Europe allowed many countries to become more centralized, allowing them to expand their societies.

(Click Chart to Enlarge)

In the 16th century, the Spanish created a "Silver Standard" economy after they discovered large deposits of silver ore in Central and South America.

Like the Gold Standard, the Silver Standard played a crucial role in international trade for Spain, making their coinage the world's reserve currency for nearly four hundred years.

From the 12th century to the early 18th century, silver traded roughly at or near a 12:1 ratio with gold.

In 1717, to help England through the inflation of the time, Sir Isaac Newton, who was Master of the Royal Mint, introduced a fixed ratio between gold and silver of 15½:1.

Newton moved the Pound Sterling, the silver standard of the time, to the gold standard by setting the bi-metallic relationship between gold and silver coins in favor of gold.

This action by Newton was the first attempt in recorded history to replace the "Silver Standard" with a "Gold Standard."

President Andrew Jackson
(1767 - 1845)

In 1834, U.S. President Andrew Jackson won re-election on the platform of removing the unpopular central bank of the time known as the Second Bank of the United States and signed the Coinage Act of 1834 into law.

The Coinage Act put Congress back in control of the nation's money supply, as is written in the United States Constitution.

The Coinage Act of 1834 also changed the gold-to-silver ratio by half an ounce to 16:1, valuing gold at $20.67 a troy ounce.

For the next forty years, the United States economy ran on a bi-metallic system; then, in 1873, that all changed.

President Ulysses S. Grant officially ended the "Silver Standard" after he signed the Coinage Act of 1873; the new law removed silver's fixed price to gold.

The United States embraced the Gold Standard and demonetized silver; those who wanted to keep silver monetized labeled the Coinage Act of 1873 the "Crime of 1873."

Silver became a free-floating commodity, sending its ratio with gold to swing up and down, as shown in the chart below and other charts on this page.

(Click Chart to Enlarge)

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Note:  All the charts, commentary, and information on this page are in no way an incentive from this guide for how you should invest or divest.

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