The uptrend in precious metals is leading a lot of investors to own both. But you can do more with gold or silver bars instead rather than buying silver bullion only to hold on to it indefinitely. You can also trade or “trade” regularly. To do this successfully, you must first understand the gold/silver ratio. The gold/silver ratio indicates how many ounces of silver are needed at any given time to buy an ounce of gold.
For 4,000 years the historical gold/silver ratio was 16: 1, which means it took16 ounces of silver to purchase an ounce of gold. Over the past 100 years, the ratio stayed at 30: 1; over the past 12 years, it approached 60: 1. Currently, it is at 80:1.
Trading silver and gold by watching the ratio might not even need for you to have cash. You could swop an ounce of gold for 80 ounces of silver. To do this you should have a certain percentage of your investment portfolio. If you end up with a lot of silver, you can consolidate the silver to buy gold or you could use one ounce of gold to buy silver bullion. Trading makes the whole precious metal investment activity more fun. You are not just buying silver and waiting for things to happen, you take control of the things that happen with your investment portfolio.
People who are constantly trading, get to understand how the markets move and can see opportunities quicker than other investors who simply just buy and hold precious metals in their portfolios. Those who trade on the silver/ gold ratio usually have to set a target. They need to watch the market closely. Silver is a volatile precious metal so waiting for the silver/ gold relationship to re-establish itself can take a while.
Investors who trade silver or gold bullion always scrutinize the gold-to-silver ratio so that they are able to tell when the right time to sell silver is going to be. When the ratio is high, silver is generally favored. Conversely, a low ratio favors gold more and may be used as a signal to either offload some silver in order to swap to gold.
It can be difficult to keep tabs on the ratio because of the wild fluctuations that silver goes through, especially for investors who are new to silver or precious metal investments.
The ratio also serves as an indicator for the best time for investors to diversify their holdings. If one kind of investment does not do well, other alternative investments can help pick up the slack or losses.
Some precious metal investment experts predict that the gold/silver ratio will return to its, pre-1900 average of 16:1. For this to happen the price of silver would have to go up to $105 an ounce. That seems like something that would take another century to happen. And so some experts advocate for a swap between silver and gold holdings when the ratio is 46:1.
It is always wise to take your time, study the markets and only move when the best opportunity presents itself.
