Gold-to-Silver Ratio Hits A 30-Year Extreme

Silver, Gold Bars

The Gold-to-silver ratio has hit a 30-year extreme, this extreme was last observed in 1993. When one divides the price of gold by the price of silver, we get the gold-to-silver ratio. It shows how many ounces of silver it takes to buy an ounce of gold. It is reportedly used in mining for the conversion of mixed gold/silver deposits to gold-equivalent ounces.

Around March 1992 – the price of silver was around $3.60 per ounce and gold was around $330 per ounce so it took around 92 ounces of silver to buy an ounce of gold in 1992. Usually, the ratio fluctuated around 45 ounces of silver to 1 ounce of gold but the ratio is currently around 92.6, which is the highest it has been since March 1993. The gold-to-silver ratio didn’t stay high for long as extremes don’t last a short time.

The ratio is also said to work like a seesaw – it changes as the prices change. As the prices of silver and gold fall, the ratio of gold-to-silver rises and vice versa. So, you can invest appropriately and get a profit if you know the direction that precious metal prices would move. The last time there was an extreme, the price of silver soared. And, around August 1993, the price of the white metal hit around $5.40 per ounce.

In that context, as the current price of silver is $15.25 per ounce, it would need to break around $23 per ounce. Meanwhile, the gold prices would reportedly not fall as investors would move to the metal as a safe haven; economic forces act up to push smart money in the direction of gold. In the U.S., the Federal Reserve announced that they are cutting interest rates, which implies that investors would not be able to count on U.S. bonds to pay out much. And, European banks have negative interest rates, so the banks are charging people to keep their cash. Investors all over the globe are thus investing in gold – and which explains the ratio’s high.

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