Trading the Gold-Silver Ratio: Strategies and Tips

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Both Gold and Silver are highly sought after precious metals, but the relationship is constantly changing and intensely followed by market participants.

The ratio tends to increase during times of economic distress. The cause of this relationship is due to gold generally outperforming silver during recessions, leading to increases in the ratio.The graph above shows the gold to silver ratio for the past several decades. In 1991 silver was trading at extremely low prices- causing a peak in the gold-silver ratio, denoted by the blue circle in the graph above.

3) The table above indicates that when the gold-silver ratio is trending upwards and gold and silver are both in an uptrend we should buy gold because it has been outperforming silver.4) Since the beginning of February, gold has increased drastically in price. We should wait for a modest pull-back before attempting to enter the market.

The gold to silver ratio could indicate the state of the world economy. If the ratio is at a low point, it could show that the world economy is in a

 

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