Gold Silver Ratio

This page will review the Gold Silver Ratio. (The price of one ounce of Silver divided into the price of one ounce of Gold)  In the parabolic move with Gold and Silver in 1980, the ratio went down to ~16/1.  The Coinage act of 1792 declared that "proportional value of gold and silver as 15 units of pure silver to 1 unit of pure gold".  Many people believe that this ratio will be attained in the current precious metals bull market.

There are several reasons why the ratio moves either up or down. If the ratio is going down, one of the following may be occurring:
  • Gold is trading flat and Silver is rising
  • Gold is dropping and Silver is flat
  • Gold is dropping and Silver is rising
  • Gold and Silver are both rising, but Silver is appreciating at a faster rate.
  • Gold and Silver are both dropping, but Gold is dropping at a faster rate.
Gold Silver Ratio since 1975, long term chart from 

    This page will be updated roughly twice a month with a basic analysis of the ratio. The Chart will typically be a daily candlestick for a 1 year period, simple moving averages of 20, 50 and 100, RSI and MACD.

    March 2013

    After reaching a high in 2012 of just under 60 and dropping to 50, the ratio has been trending up with higher highs and higher lows. With the last peak of 56 in Feb, the ratio is currently on a downtrend which suggests that Silver may be slightly gaining on Gold in the near term. With 2 previous lows in place, I look for the price to at least touch the lower trend line (not shown) which is around the 53 level.

    Mid April 2012

    Like Gold and Silver, the ratio is also in a large trading range which does not look like it is gong to make a significant move one way or another.  That is until a catalyst of some kind moves one of the metals while the other is stagnant.

    The ratio is above the 50 and 200 day moving average - Bullish
    Even though it has been in a trading range since last October, it is on an ascent - Bullish
    It is overbought on the Slow Stochastics indicator - Bullish if it should embed, otherwise, Bearish.

    Looks like some heavy resistance near the 58 level which was a low point in September 2010. (Green line)

    There is not too much exciting here, the ratio may continue this trading range until fall and the 'seasonals' come into play.  (If they do this year).

    March 2012
    Quick update on the Gold Silver Ratio for the latter part of March 2012.  Still in a consolidation range just like Gold and Silver...

    The RSI (Relative Strength Index) is producing lower highs which suggests a downwards bias with the GSR.

    Slow Stochastics are in the overbought area at ~81.16 (Circled in blue) which also suggests and downwards move in the not too distant future.

    Maybe a small rally w/Silver is coming before May/June?  Even if a small rally should occur, it may drop to the lower portion of the trading range and bounce around for a little while.  By then, the summer 'doldrums' come in to play and choppy trading should take over the PM markets and with the GSR. 

    January 23rd, 2012

    Silver has been outperforming Gold over the last few trading sessions and is seen as the Gold Silver Ratio gapped down towards the lower part of the sideways range and below the bottom trend line.  It is now also below the 20 and 50 day moving averages.

    A few weeks ago, there is a post on the divergence between the rising Gold Silver ratio and a declining RSI, which suggested a lower ratio.  Well, we now have a lower ratio, but will it continue to decline?  It needs to drop below the last significant low which was around the 48.5 area indicated with the orange horizontal line.

    The MACD and RSI are also on the decline, so it looks like a lower ratio may be realized within the next few days/weeks.

    January 7th, 2012

    1 year daily chart of the Gold Silver ratio with a 20 and 50 day moving average.

    The RSI indicator above has a peak in late September 2011 and another during the latter half of December 2011. The trend line connecting these two points in on a downward trend, but the ratio depicted in the chart below is on a bullish uptrend.

    This is what many technicians call a divergence which may signal a decline in the ratio going forward (?)  When? It may be a little while as Silver needs more speculators to come into the market to push the price back up over the $30 level and then past the $40 level (again).

    Hedge funds are most likely waiting for the Silver chart to start producing higher highs and higher lows before they invest capital back into this market.

    Dec 12th, 2011

    Not much change from the last update, the GSR is still in a trading range and can be viewed as consolidating.

    An argument can be made that the ratio is producing higher highs and higher lows over the medium term.  It is also trading above the 20 and 50 day moving averages which is a typical bullish trend. With an uncertain worldwide economy, the current consolidation range may be intact for the next several weeks/months.

    Should the PM's sell off in the near term, expect the ratio to go higher as most investors will sell off their Silver positions before Gold due to it's relationship to industrial use.

    Dec 3rd, 2011

    The Gold Silver Ratio has been in a trading range and will most likely continue until one of the metals makes a move either up or down with the other flat or moving in the opposite direction.
    Here is a two year chart of the ratio with a 20 and 50 day moving average. I've placed Blue lines indicating the top, bottom and right in the middle for an estimated 50% level.

    One can make the argument that it is on an ascent and the ratio may be heading higher. It's definetly on an upwards path of higher (from May 2011) , consolidation (Green boxes), higher, consolidation, ??? It's above the 50dma and also above the 50% retracement of the last significant move.

    If Gold should move to the upside, it will pull Silver along with it. If they appreciate at the same rate, we'll have a flat ratio. It's a matter of time before Silver starts another rally to the upside and appreciate at a faster rate than Gold, maybe next year, maybe 2013? Until then, expect Silver to lag / follow Gold's path whichever it may be.

    Many expect the ratio to be under 20/1 at the final parabolic phase of the bull market. That is why many people invest in this particular precious metal. The downside is that it is much more volitile than Gold With Gold currently trading at $1747 and ounce, a 20/1 ratio would put Silver at $78.40 an ounce.

    One can argue that you will be more than doubling your capital within the coming years by investing in Silver when it reaches a 20/1 ratio. Not a bad return considering that a saving account is less than 1%.
    Nov 25th, 2011

    After the major sell off in May 2011, Silver started a trading range indicated with the blue box between May and late Sept 2011.  Silver again sold off after the Federal Reserve mentioned that they were implementing a "Twist" program. Coincidentally, the CME raised margin requirements a few times which dropped the price of Silver significantly for a 2nd time.

    The ratio is in another trading range bouncing between 49 and 56.  With Eric Sprott in the market for 1.5 billion worth of physical Silver, this may be a catalyst for an upside breakout next month and into 2012...(?)