There is something called the gold/silver ratio. For those who don’t know, that ratio is the price of one ounce of gold compared to one ounce of silver. That is, how many ounces of silver would be a trade for one once of gold at any given point in time.
A higher ratio means that either gold is overpriced, or that silver is underpriced. That can dictate which of the metals is the better deal. Historically, the ratio is usually between 60 and 80. In April of this year, the ratio was 100.8, meaning that one ounce of gold was worth about 100 ounces of silver.
Some investors are talking about the 80/50 rule. That is, if the ratio is higher than 80, stop buying gold and buy silver instead. If the ratio is less than 50, then silver is higher priced relative to gold, and it’s time to buy gold.
Thanks to the skyrocketing price of silver earlier in the week, the ratio is currently (as of this writing) 57. The gold/silver ratio was last below 50 in April 2011, when it reached a low of approximately 35:1. In April 1968, the ratio hit a century-long low of 16.75:1.
So why is this important to us? If you want to increase your holdings, you would sell some silver and use the cash to buy gold. Once the ratio returns to its historical mean, you would then reap a profit. Let’s say that the ratio hits 40. At that point, 40 ounces of silver (worth $1160 a year ago) could be sold and traded for a single ounce of gold. Once the ratio returns to its historical range, that would require that silver loses value or gold increases in value. Either way, your ounce of gold would be worth 60 to 80 ounces of silver, but you only paid for it with 40 ounces.
Just food for thought.
12 Comments
Tim · December 27, 2025 at 6:34 am
I’m waiting for it to drop. I’ve been monitoring it daily. Here’s a good place to check. https://goldprice.org/gold-silver-ratio.html
Tom235 · December 27, 2025 at 8:05 am
FWIW: My gold/silver dealer bases prices on Kitco’s 24-hour spot price. Right now, I can sell silver at $4.50 below spot (so roughly $75/oz as of this writing).
SiG · December 27, 2025 at 9:37 am
A harder question than which one to buy is that ratio is coming down as both metals’ prices are increasing. The ratio is between 50 and 80. Since above 80 means buy silver and below 50 is to buy gold, does that mean to buy both or don’t buy anything until the market makes up its mind?
Alternatively, does it mean the world is losing faith in fiat money? I’ve seen it described as that – that the big buyers are going to metals instead of T-bills or other pieces of “fancy paper.” Does that mean all the big players think the long-forecast collapse of paper money is about to happen?
Divemedic · December 27, 2025 at 9:01 pm
Buy the ratio. Profit from the imbalance.
Michael · December 27, 2025 at 10:24 am
The costs of the transaction need to be addressed.
In some states I understand it’s a taxable transaction in larger dollar amounts. Is your dealer willing to go to jail for tax evasion for your sake?
Premiums go both ways buying and selling. The “House” earns its profits while taking the risks that the price may drop before they unload the PM.
Rare is the deal that they will buy your Silver (for example) at melt (generally 8-15% less locally) and sell you gold without a decent premium to golds melt value.
When gold and silver are again recognized as “money” that you can take to Walmart for toilet paper and groceries this premium issue will fade.
JNorth · December 29, 2025 at 3:26 am
It’s not just “some states”, unless you mean Nation States, if you sell gold or silver, even to immediately buy the other, you have to pay capital gains taxes on it. Also you can’t get around it by “trading” gold for silver (or vice versa), the feds will want capital gains tax based on whichever you sell.
Bob · December 27, 2025 at 11:26 am
I traded gold for silver last spring when the ratio was 100.
I hugely regret not trading silver for gold in 2011 when the ratio was 40.
A few months ago I traded gold for platinum when the Au:Pl ratio was 3, now Au:Pl is under 2.
I might trade silver for gold if the ratio drops below 50.
Ratio trading is like driving on the freeway and making lane changes so you’re always (or usually) in the fastest lane. However it takes fairly big swings in the ratio to make this work since you pay premiums on both sides of each trade.
Divemedic · December 27, 2025 at 9:03 pm
Thats why a ratio of 40 or less is such a big deal.
WallPhone · December 27, 2025 at 12:00 pm
Consumption, and thus demand, of both metals has recently changed by changes in technology use. Due to the photosensitivity of silver compounds, it is consumed by the production and processing of camera film.
Malleability and corrosion resistance make gold ideal in the production of electrical contacts and microchips. Thus, the shift to digital photography has influenced the ratio.
It's just Boris · December 27, 2025 at 1:40 pm
A few things to consider when making an exchange. Precious metals are taxed as collectibles, meaning the long term tax on gains can be as high as 28%, and as far as I know there’s no exception for performing exchanges if you’re going though dollars along the way. Also, some states tax precious metal purchases, adding more to the expense side.
And then there’s the spread on buying and selling vs the spot price.
Not saying don’t do it … But depending on your gains upon selling, the effective ratio you realize can be very different from the ratio of the spot prices.
KevinM · December 27, 2025 at 4:59 pm
it’s not going to drop for a while with China basically cutting exports and five year clamp on the mining elsewhere silver is in for the squeeze.Warren Buffett has been selling stocks for the last couple of years he’s expecting silver to go triple digits.Article 12/16/25
“Buffett estimated that the world was consuming perhaps 150 million more ounces of silver a year then it produced, a trend that had persisted for a few years. For most commodities, that imbalance would have caused prices to soar. But for silver, one simple anomaly — a massive above-ground inventory — was being used to cover the production shortfall.”
Samsung who uses some of the most Silver in production in the world just leased an old mine in Mexico and have a company out of Canada working the mine…all proceeds from the mine go to Samsung alone.The ole dayus prior to early 1900’s it was 16/1 ratio to Gold some are talking we may see 10/8 or 7 to one I have been stacking not alot but if those numbers are even close my house gets paid off.
Joe blow · December 29, 2025 at 6:11 am
Palladium is also at an extremely low valuation right now. It’s got a range of industrial uses, like silver, that could drive a large price increase.
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