The Gold-to-Silver ratio
Gold-Silver ratio enables an individual/customer to understand how much silver will be required for a person to buy gold. For example, at today’s current price in the year 2020, if the prices of silver and gold are 23.82 USD and 1,887.75 USD respectively, then the ratio is 79.2. Implying and meaning, an individual need 79.2 ounces of silver for buying 1 ounce of gold at these prices.
Gold-to-Silver chart representation
The gold to silver chart representation illustrates whether gold is generally underestimated and overestimated in comparison to silver
- Upon calculation, when the derived result is low (for ex. 50) gold is considered as cheap in comparison to silver.
- Upon calculation, when the derived result is high (for ex. 80) gold is considered as expensive in comparison to silver.
Silver stacking : The 80-50 switching rule example
Gold Oz brought for USD 304, in January 1985 would be worth by March 2019 using:
- Straight Gold Holding: 1,204 USD x 1.0 Oz = 1,204 USD (3.96 x investment)
- The 80-50 Switching Rule: 1,204 USD x 4.9 Oz = 5,899 USD (19.4 x investment)
Previous achievements do not guarantee or provide a prospective return, but the rule and regulation for switching into the relatively unappreciated metal is a traditionally comprehensive strategy.
Gold is intended to multiply your precious metal possessions by switching into the underestimated metal
- This rule for calculation purpose implies switching into the precious metal silver once the ratio hits around 80 and back into gold once it hits around 50.
- From 1985, the 80-50 rule would have occasioned barely in 7 trades (one every 3 to 5 years) consequential in 1 gold Oz to turn into about 4.9 Oz (or silver equivalent). The switching rules intends to achieve lesser worth risk as they help to switch-out of precious metals which increase unequally fast providing less unpredictable and advanced results down the line