The Gold-Silver Ratio is Over 80:1- Time to Act on Silver
Suppose you had 10 ounces of gold and you agreed to trade it for 800 ounces of silver. Then, sometime down the road as prices change, suppose you could trade that 800 0unces of silver back into gold, but that you got 16 ounces of gold instead of the ten you started with.
You didn’t invest any more money, but the amount of gold you own just increased by a sixty percent!
Pretty smart move, right?
You bet it is. This example, using the spot prices of gold and silver, is for purposes of illustration only, because of transaction costs and since different coins and bars have their own premiums relative to the spot prices. But many of our clients and I, myself, have used this powerful strategy for years to substantially increase our precious metals holdings.
I would like to recommend it to you now. Because this is the time to trade gold for silver.
Let me explain.
The gold-silver ratio, which is the price of gold divided by the price of silver (essentially how many ounces of silver does it take to buy one ounce of gold), is now around 83 to one, the highest level in about 25 years. For more information, read our gold-silver ratio article here.
We recommend trading gold for silver with the ratio this high. Because gold and silver each have their own supply-demand fundamentals, their prices don’t move in lockstep. Down the road as prices change the ratio between the two metals will change. The gold-silver ratio can be expected to rise in a falling market, which provides us today’s opportunity to use this strategy. Similarly, in a rising market the ratio will move lower. For example, in April 2011, with silver at $50 an ounce and gold at $1,500 an ounce the ratio hit 30 to one.
Our intent will be to target trading back into gold when the ratio is 50 to one. But your broker will be able to give you specific recommendations depending on market conditions at the time.
The gold-silver ratio doesn’t tell you where the price of either metal will be next month or next year. But at 83 to 1, it is very persuasive evidence that the price of silver is low relative to the gold price.
I urge to speak with your broker about this strategy. They will be happy to explain this powerful strategy in more detail and answer your questions. We especially like it for growing your gold and silver holdings because you are always invested in precious metals, moving into the precious metal that is relatively undervalued and therefor has the greatest relative price appreciation.
One day people will be more interested in the total number of ounces of gold and silver they have rather than the dollar value of their gold and silver. When that happens, you will be very happy indeed that you took advantage of the gold-silver ratio strategy.