The gold/silver ratio measures the relative strength of gold versus silver prices. It shows how many ounces of silver it takes to purchase one ounce of gold. To get this number, you divide the current gold price by the current silver price, giving you the gold/silver ratio. It is a simple way to see which of the two metals is gaining value relative to the other.
The meaning of the ratio
Whenever the gold/silver ratio rises, it means that gold has become more expensive compared to silver. See the gold/silver ratio chart below:
On the other hand, when the ratio falls, it means gold has become less costly relative to silver.
Some analysts, traders, and investors look to “trade the ratio”, buying silver when the gold/silver ratio is high and switching to gold when it falls. So, the next time you hear of the gold/silver ratio you will know what the significance is.