Monday, December 6, 2010

Gold/Silver Ratio

The gold/silver ratio is a valuable tool to use for those who would like to "trade-up" for more ounces of silver or gold. Currently the ratio is approx. 49:1 (Meaning it takes 49 ounces of silver to buy 1 ounce of gold). You get this ratio by dividing the current spot price of gold which is $1,385/ounce by the spot price of silver which is $28.50/ounce. Historically when silver reached all time highs the ratio was around 15:1. A ratio of 25:1 or above would make silver an excellent buy in relation to gold.

What makes this ratio important is that you should allocate more of your portfolio to silver when the ratio is above 25:1 and allocate more of your portfolio to gold when the ratio drops below the 25:1 range. In simple terms the silver that you hold will purchase more ounces of gold when the ratio narrows. With a current ratio of 49:1 silver is very cheap. When the ratio narrows sell some of the silver you hold and use it to purchase gold and you will benefit by increasing your ounces owned of gold by the value of your silver increasing without having to allocate more cash to do this.

Please remember that I am NOT a financial advisor. I am just sharing some information that will hopefully be useful to those that own precious metals.

1 comment:

Vijay Sharma said...

in spite of being non financial advisor you are doing work mike thanks ..............
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