Why the gold to silver ratio is important

Why the gold to silver ratio is important


Welcome to illuminati silver, we tell you
the truth about silver. Today is Monday 27th August 2018 and we are
very briefly covering the Gold to Silver ratio and why it is important.
Anyone who has watched a You Tube channel or read an article in the gold and silver
space will undoubtedly have come across the issue of the gold to silver ratio. Well we
shall address what it is, and why to some its important and to others less so.
First, a simple definition: Basically, “the gold-to-silver ratio is the amount of silver
it takes to purchase one ounce of gold.” I will say it again – “the gold-to-silver
ratio is the amount of silver it takes to purchase one ounce of gold.” With gold currently
standing at $1,205 and silver at $14.82 we divide the silver price into the gold price
and come up with a ratio of 81.3:1 – yes gold is 81.3 times more expensive than silver
or you need 81.3 ounces of silver to be worth the same value as 1 ounce of gold.
So why is it important and to whom is it important? Well, Investors who trade gold bullion, silver
bullion and other precious metals scrutinize the gold-to-silver ratio as a signal for the
right time to buy or sell a particular metal, and in some cases to sell one and use the
proceeds to purchase the other. So when the GSR is high, purchasing silver is preferred
and when it is low then selling silver and or purchasing gold is preferred.
However there is a dilemma with this strategy; because the gold-to-silver ratio fluctuates
so wildly, it can be difficult for inexperienced, new or small-scale investors to read the signals
and make a profit. So generally, because of the costs involved
much of this selling, buying and swapping strategies tend to be more confined to the
paper markets as opposed to the physical although having said that we are aware of physical
holders doing this, but they have to factor in the costs and assess whether the transactions
are large enough to cover these costs and to make it worthwhile.
So what is a high ratio and what is a low ratio? Well lets look at this in an historic
context. Some records date back to the late 1600’s
where the ratio vacillated between 14 – 100. Come the 1900’s however, the ratio remained
quite steady at or around 16 to 1. This was likely because many countries were using gold-
and silver-backed currencies. For instance, France and the United States assigned statutory
limits on what the ratio could be. In addition, the U.S. Geological Survey estimated that
there is just over 17 times more silver in the Earth’s crust than gold, which could
provide another explanation for the pre-1900 gold-to-silver ratio average.
However, throughout the twentieth century and into the 21st Century the gold to silver
ratio has averaged somewhere between 47 – 50:1 Now please note that we say averaged. For
example, on 1st January 1970 when quite precise records were established and made publicly
available, the ratio was just over 18 :1. On the 1st January 1991 it peaked at just
above 102:1 and since then it’s been as low as 38:1 on 1st April 2011. But as we say
currently stands at 81:1. What we have noticed, and this isn’t a revolutionary
discovery, but currently most investors, certainly in recent years, are of the opinion, that
whenever the ratio hits or rises above 80:1 that is the time to sell gold and buy silver
and from a trading aspect that has tended to pay dividends quite handsomely.
However, there is something we must point out – and please do not be fooled by the
logic, well if it comes out of the ground at 17:1 then the price should eventually revert
to that ratio. Absolutely poppycock. For example, a typical apples costs 40 cents, an orange
60 cents and a grapefruit 80 cents but they don’t come out of the ground or grown in
those proportions. There is also far less platinum in the world than gold, and yet platinum
is cheaper. So, lets eradicate that thinking. We may be more favourable to that idea if
gold and silver were perfect substitutes for one another and so one would automatically
swap one for the other, but that is not the case.
So, in theory there is nothing to stop the gold to silver ratio becoming 110:1 or 30:1
it all depends on both the speculative and real demand for one compared to the other.
What is fair to say though is that people who follow charts are in themselves pretty
predictable and so when this magical 80 figure is breached, market corrections do occur – but
having said that as any investment adviser will tell you, “the past may not be an accurate
indicator of the future.” But for those who truly believe this stuff
devoutly, then we shall feed you a little silver porn (pardon the expression) and here
it is: “In the end, in order for the ratio to return
to its pre-1900 average, at the current gold price, the price of silver would need to rise
to approximately $75 per ounce. Likewise, if the ratio were to drop to its long-term
average, silver prices would rise to about $25 per ounce.”
And it is this porn that the porn filmmakers or in other words the pumpers will feed you
until you pick up that phone and purchase more silver.
Now this subject is much more complicated than this and there are various trading algorithms
and patterns which do indicate what one should do or not based on historical data, however
they are not always accurate for if they were then the majority of people who trade would
make money where it is estimated by professionals that less than 10% of traders make money on
a consistent basis. We shall be discussing this in greater depth within our Inner Sanctum
in September. Meanwhile and broadly speaking, if you believe
that historical data is important and does reflect at least the psychology of traders,
then in relative terms at 81:1 silver looks like a better investment opportunity than
gold – we thought you would like to know. We hope you have found this video interesting
and informative and if so, please give it a thumbs up and share it on twitter. Please
ensure that you have subscribed to our channel and pressed the bell sign so that you are
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and if you haven’t already done so please subscribe as a free member for regular email
updates and offers. Disclaimer:
Illuminati Silver owners come from a background of Banking, International Wealth Management
and Economics. Having now retired from these worlds we are not qualified to give investment
advice. Therefore, this and other productions must not be deemed to be giving such advice
and merely represent the personal views of its owners.

54 Comments

  1. Everyone assumes silver will rise to regain whatever ratio you think is correct. The ratio could also be reached by gold dropping .

  2. One Major and worth while notification. Turkey, Russia, & China have been buying Gold heavily. Russia has been for years in small amounts but now the 3 countries are stockpiling it. This in my view can see the fall of the high value US Dollar. If I am right the US has 55 to 60% of its dollar value on its gold reserves. As I stated and agreed with you earlier I do not think Gold or Silver have hit the floor yet.

  3. The base ratio isn't the full picture . For physical metal silver has VAT and gold doesn't . Silvers premium are far higher than golds and that alters the ratio UK owners can achieve.

  4. Data from history (before 1975) where gold was a fixed price, is worthless. Only data after the real ratio was adjusted, say after 1985, then you can look at that data. However, with the premiums added to the process, I can't see selling my gold for silver.

  5. Thank you for your insights. I am at the early stages of my silver and gold hoarding…I’m not really expecting an apocalypse but then I wasn’t expecting the GFC in 2008…

  6. JP Morgan owns 800 million troy ounces of physical silver. They manipulated the market down and when they clear out all weak hands they will manipulate it UP. WAY UP. Be ready.

  7. One practical application of the gold to silver ratio is as a predictor of a major stock market correction. I've only recently become aware of this, but the theory seems a bit problematic over recent history. It is, nevertheless, flashed as a warning by harbingers of imminent financial disaster.

  8. Cost of Production is the major factor. According to World Silver Institute Silver is being produced on average at about $11/ounce.

    Gold from what I've heard is around $1000.

  9. Major central banks are buying gold in greater quantities to silver. To keep the gold price as low as possible they need a counter weight. That is the fools gold or silver and that is for the general public.

    They don’t want the masses buying into gold pumping the price up and creating a boom in upward prices. They need counters for the general public, such as stock and shares, crypto currencies and silver as well as many others. Just think how much gold they are buying and how the price has not run upwards is quite incredible and testimony to their abilities in misdirection and market manipulation through paper trading.

  10. I plan to start shaving off some silver to turn into gold once we get under 70-1. Start with the most generic bottom 5%-10% and go from there.

  11. if we look at weimar republic, the ratio even go to 160:1 during the hyperinflation..
    always get some of your gold set aside ready for anything that might happen in the future.

  12. My theory is to fill up my matress and duvet with silver, and my pillow with gold. Thats my ratio.

    After that i think i will sleep pretty tight 🙂

  13. https://youtube.be/vM-PcolDBO
    The most recent Gregg Hunter interview on YouTube USA Watchdog with Holter & Sinclair, challenges Gold-to-Silver ratio determinates. This is due trading influences they discuss with Hunter. Might Illuminati Silver comment on the Holter & Sinclair propositions?

  14. By holding large amounts of silver.JPM protects itself from inflation (growth) and a dollar reset.They may also be writing options on the silver there holding.

  15. @Illuminati Silver, hum…. from the previous videos I was under the impression that you are bearish to Silver and now this video?! Why the change of mind?

  16. If I held that much I would writ options with strike price s at 12 dollars and below .Knowing I have the funds to buy at 12 dollars and at the bottom.All the puts expire and they rake in the cash and keep the silver.lol

  17. Illuminati Silver do you know the real economic reason Gordon Brown chose to sell 395 tonnes (more than half the UK's reserves) of gold between 1999 & 2002? My guess is it was something to do with China's Yuan transitioning to become the new world reserve currency.

  18. One flaw in your logic – if gold and silver were perfect substitutes for each other, it would be irrelevant at what ratios they came out of the ground – their values would be equal. All that said, I do appreciate your informed and "non-pumper" advice.

  19. Outstanding presentation and analysis. My sense is that the price is strongly correlated to mining costs, particularly with silver as a byproduct of other industrial resource mining. Cost to mine an ounce of silver is about $10. Cost to mine an ounce of gold is more like $850. These determine a pretty hard floor to the market, and demand and other forces just determine how strong the gravity pulls to this floor.

    Zinc or copper producers would love to get $25 or even $80 per ounce for the silver. But they won't stop production or stop selling this tiny byproduct just because silver costs $15, or even $12 per ounce. So there is always a seller for silver, as long as the associated industrial mining production continues apace.

  20. Using the ratio to earn a higher ROI than just holding one metal or the other is the topic of my book. The investor sets his ratio triggers based on the average ratio. The book explains when premium prices on physical metals need to be addressed, and presents four scenarios that accommodate a physical/paper mix. I agree with Illuminati that the big traders/advisors favor the ratio over other market signals in setting their price targets. TradeTheRatio.com

  21. The fact that silver is 17X more abundant in the earth's crust is telling about the current 81:1 ratio. Either gold is far overvalued,
    or silver is far undervalued. Strange world we live in.

  22. Where can you get the information on historical data, charts etc. Are there algargorys that are available to plug in numbers. Or postulate theory. I sure would like to put hypothetical analysis to the test. Using the Historical values and modern principle standards. And coincide there gains and losses in charting analytical databases.

  23. Your presentation mentioned nothing about manipulation and criminally by some banks who were caught and fined 10's of millions of dollars for rigging the price of silver.

  24. All this info is about paper metal. Do not mix with physical metal at all. Keep holding physical metal for long term . Low buy and keep.

  25. what a nice word TRADERS. they are not but gamblers. selling something they do not possess. A dirty crafty idea from the white man. regrettably the whole world are gamblers. It has nothing to do with the real stuff. paper currency is not MONEY but outright fraud by govt decree. the law of nature will ultimately prevail.

  26. I don't even look at the ratio, I don't really care. All I know is that the FIAT money will end some day and throughout history gold as always win over all other system. Gold is always the winner.

  27. Thank you for the information. I was looking at the Gold/Silver chart yesterday morning. The premiums and the long delivery wait times is what put me off purchasing silver yesterday.

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