Basically, this is how many troy ounces of silver you can buy for the same price as one troy ounce of gold. The gold silver ratio is obtained simply by dividing the current gold price by the current silver price. What currency you price them in does not matter, as long as you use the same currency for each, and obviously for the same weight. So, US Dollars per troy ounce will work just as well as Euros per kilogram, or British pounds per ounce.
Background to the Gold-Silver Ratio
In ancient Greece, the ratio of gold to silver was generally between 10:1 and 13.5:1, depending on the relative proximity of gold or silver mines. In the 1930's and 1940's the ratio reached 90:1 or higher, and in 1991 it peaked at about 98:1 (although, we have seen one source which claims over 100:1 peak). Other sources state that the gold silver ratio is no longer relevant in today's markets. We believe it is a worthwhile measure, but would stress that it is difficult if not impossible to state what the ratio "should" be. When the gold to silver ratio is high it means that gold is expensive compared with silver, or the converse, that silver is cheap relative to gold.
Hold Onto Gold for the Long Term
It is important to remember that investment in precious metals is usually done with a view to the long term. Please do not expect to invest your money and weeks later have made a large profit. Silver does not fluctuate as noticeably as gold, but it is more volatile than gold. Investors can use this opportunity. It is easy to panic when you have invested and then the silver price goes down. Of course investment in precious metals (as with property, shares, etc.) is a gamble. However, if you are planning it as a long term investment, then you have a better chance of seeing a good return.
You may wish to view all of our articles on our gold guide.
You may wish to view all of our articles on our silver guide.
We have a dedicated live gold:silver ratio page for those interested in seeing the current ratio.