What is the Gold-to-Silver Ratio?

The gold-to-silver ratio is calculated by dividing the price of an ounce of gold by the price of an ounce of silver. Gold is traditionally priced higher than silver, so this ratio generally expresses how many ounces of silver can be bought with one ounce of gold.

As simple as it may be, the gold-to-silver ratio is an extremely telling and important indicator in the precious metals world.

Gold and silver are the most popular precious metals for investors.

  • Gold has been highly valued for thousands of years, with high-value applications that range from jewelry all the way through technological and industrial. Gold is an investment that tends to hold its worth even when the economy takes a hit or when inflation peaks. While it tends to hold its value, gold can come at a bit of a premium price and so many investors have to exercise discretion with how much they buy.
  • Silver goes hand-in-hand with gold in terms of popularity, although it is very much the affordable younger sibling of the precious metals world. Its wide range of industrial applications allows the value of silver to persist, particularly since it is featured heavily in rapidly-growing industries like solar energy.

The gold-to-silver ratio might seem like a useless number to watch. But as the graph below shows, the gold-to-silver ratio has moved quite a bit over the last century:

Gold-to-silver ratio over time


The gold-to-silver ratio is most valuable when it is at extreme values, where it can and has signaled large shifts in both the gold and silver markets—and all the associated industries and economic sectors that contribute to gold and silver’s usage and prices. In fact, it is even used to some degree by equity investors to foretell major shifts in the economy.

Gold-to-Silver Ratio and Recessions

To understand this indicator fully, you need to understand how many investors view each of the metals in its equation.

Gold is highly valued because it serves a lot of purposes. While most people are familiar with its use in jewelry, physical gold is also used in electronics and medicine to a lesser degree. Nearly half the annual demand for gold comes from investors and central banks, gold coins and bars as a long-term store of value. In fact, gold’s price is often tied to investor demand.

Silver, on the other hand, operates differently. Over half of the demand for silver comes from industrial manufacturing applications (electronics, photovoltaics etc.) while a minority of demand, ranging from one-quarter to one-third, comes from investors. Because of its heavier use in industry, silver’s price tends to be more economically sensitive than gold’s price, rising during economic growth and languishing during recessions. Silver is an investment metal only some of the time; more often, it is viewed as primarily an industrial metal.

The numbers from one specific year clearly illustrate this discrepancy between the two metals. In 2019, gold investment and  jewelry made up 92.5% of total demand. On the other hand, silver as an investment plus jewelry was only 38% of total demand. The rest of the demand for silver came from industrial sectors like electronics, photography, and silverware.

So, when economic downturns occur and industry slows down, demand for the much more industrial silver tends to decline. Gold’s characteristic as a hedge against economic slowdowns offers far more to investors — and gold demand often increases during such times.

These tendencies in price fluctuation clearly affect the price of each metal. Silver, which lags during the early stages of a recession, sees prices at least fall flat or sometimes even drop as industrial demand is reduced (less production, companies closing, etc.). Gold, however, holds up much better since it is used so essentially to store and protect value.

You can see how the gold-to-silver ratio can bear a clear connection to recessions. As the numerator goes up (gold prices), and the denominator trends sideways-to-down (silver prices), the ratio gets larger.

In other words, as safe haven demand of gold increases and industrial demand of silver decreases, this ratio spikes. You get a low ratio when the inverse happens and the demand of gold decreases while the demand of silver increases.

These trends more than just theory. With gold and silver prices dating back centuries, we can see this in action.

The gold-to-silver ratio can tell you a lot of about the state of the economy throughout the years. Revisiting the ratio’s chart above, you can see that the last four peaks occurred during either recessions or periods of great uncertainty in the economy.

  • In early 1991, the U.S. was in a recession. It was also engaged in the first Gulf War. After a long, slow climb from the wild late ’70s and early ’80s in precious metals, gold’s importance over silver finally peaked.
  • In early 2003, the economy was not in a recession. However, the U.S. was in the buildup and kickoff of the second Gulf War in Iraq. This was only two years after the disastrous economic fallout of the dot-com collapse, just 18 months after 9/11. There was still a lot of uncertainty in the economy.
  • Right at the peak of the financial crisis of 2008, this ratio spiked again to about 80, the highest since 1991.
  • In the first half of 2020, the gold-to-silver ratio reached and then blew past its all-time-highs to more than 110. As COVID-19 swept across the globe, demand for electronics and new silverware clearly collapsed while gold demand surged on its historic reputation as a safe haven store of value.

These are the main peaks worth looking at in the gold-to-silver ratio. Each time you can see why gold as an investment far outweighed silver as an industrial material.

But technicians and forecasters do use the gold-and-silver ratio for other things than just to look back and see when we had an uncertain economy.

Strategies and Economic Indicators

Silver may be seen as an industrial metal most of the time, but it is still a precious metal with inherent hedging characteristics of its own. After all, 38% of its demand did come from investments and jewelry last year. During economic downturns, that’s when its investment appeal comes out.

For instance, demand for physical silver more than tripled between 2007 and 2008 just as the rest of the economy was grinding to a halt.

Silver’s vallue as an investment might not be apparent immediately. Investors at the start of a downturn seem to turn to gold. In almost every recession over the last several decades, gold’s price increased earlier and faster than silver’s. As you can see in the ratio chart, the peaks came early on or at least trending to the middle of recessions.

But after gold has had time to climb in price for a few months, demand for silver as an investment or hedge increases too. This also likely is due to silver’s relatively low price compared to gold’s, which allows it to be accessible for purchase during a time when people might be otherwise reluctant to spend. (Maybe when gold’s rising price puts a 1 oz American gold eagle out of the reach of many households, they turn to silver American eagles instead?)

One time we see this mid-recession silver upsurge was in the 2008 demand for silver bars and coins; as a result, silver’s price started taking off halfway through the crisis. But you can see that silver prices hit a multi-year low right in the middle of the recession (marked in gray), just before investors started to turn to it. It’s worth noting that low correlates with the gold-to-silver ratio high.

Silver prices over time


Trends like this one don’t go unnoticed by investors. During the later stages of an economic downturn, silver tends to play catch-up with gold. Often, since its price is already more volatile due to its less-liquid market and greater number of uses, that can lead to wild price swings in silver at the tail end and just after recessions.

Following the ‘08-‘09 recession, gold continued to climb toward what became its all-time high, reached in August 2011. The move from the peak of the gold-to-silver ratio in November 2008 until August 2011 represented a move higher of more than 100% for gold. These historic highs generated extensive buzz in the precious metals market and beyond.

Silver, however, actually did far better in this period. Not only was it in high demand for its investment hedging qualities, it was relatively undervalued compared to gold, which had already been going up in price through 2007 and 2008. This led to a rally in silver prices from less than $10 to nearly $50.


As with any economic indicator, the gold-to-silver ratio is just a number. It can’t tell the future, particularly given economic volatility. And it is only a tool used by those looking to time their investments or reallocate their precious metals holdings. So while this price ratio cannot offer investment advice, it does have some unique qualities and a chart history that can offer up some insights into economic performance and may offer insights for crafting trading opportunities.

You could compare this tool to similar ones like the gold-to-oil ratio, or the gold-to-GDP ratio. Each of these offer simple ways to indicate when large shifts are happening in the precious metals world and elsewhere. And watching how precious metal prices perform alongside major currencies like the dollar allows for a more complete economic perspective.

However, the stories told through the gold-to-silver ratio aren’t over. With the highest peak in history coming just in the first few months of 2020, it is definitely one economic indicator worth continuing to pay attention to.