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What Is the Gold-Silver Ratio?

The gold-silver ratio is the comparison of the price of gold to the price of silver. It has been used to measure the relative value between the two precious metals for centuries and has played a significant role in the history of currency and trade. Today, those two metals are among the most frequently traded on commodity markets, with industrial applications ranging from automotive and aerospace to solar cells and semiconductors.

With increased industrial demand and the abandonment of the gold standard, the gold-silver ratio has experienced significant volatility since 1933. However, investors can still use it as a hedging strategy to help identify opportunities for trading gold and silver. That’s because precious metals historically serve as reliable portfolio hedges during periods of market volatility, economic downturns and recessionary conditions.

This article takes an in-depth look at the gold-silver ratio, its importance for investing, its limitations and how to utilize it.