The gold/silver ratio in plain words

What the gold/silver ratio actually measures

The ratio compares the price of gold with the price of silver, weight for weight. If the ratio is 80, one ounce of gold is worth the same as 80 ounces of silver at that moment. It is a comparison, not a price in dollars.

Because it is a comparison, the currency drops out. Work it out in Singapore dollars or US dollars and you get the same answer, as long as both prices use the same currency and the same unit of weight. When the ratio falls, silver has gained ground on gold. When it rises, gold has pulled ahead.

You could flip it round and ask how much gold one ounce of silver buys. The answer is a small fraction that nobody finds handy, so the market convention is gold divided by silver.

How to work out the gold/silver ratio yourself

You need two numbers taken at the same moment: the spot price of gold and the spot price of silver. Spot is the live wholesale price the world market trades at, before any dealer premium. Our market page at bullionking.sg/market shows both through the day.

Here is an example with round numbers that are deliberately nowhere near real prices. Say gold were 100 an ounce and silver 1.25 an ounce, both in the same currency. Divide 100 by 1.25 and you get 80. The ratio is 80, sometimes written 80:1.

Two things catch people out. The usual one is mixing units: gold per troy ounce against silver per gram gives you nonsense. The other is timing. Both metals move during the day, so a morning gold price and an evening silver price will give you a figure that is slightly off.

• Take the gold spot price per troy ounce.
• Take the silver spot price per troy ounce, at the same time and in the same currency.
• Divide the gold price by the silver price.
• The result is the number of ounces of silver that equal one ounce of gold.

Why the gold/silver ratio has swung so widely

For long periods, governments that minted coins in both metals set an official ratio by law. The United States Coinage Act of 1792, for instance, fixed it at 15 to 1, and official ratios of around 15 or 16 were common in that era.

Once those systems were abandoned and silver stopped being used as money, the two metals were free to drift apart. Within living memory the ratio has dipped below 20 and climbed above 100. So one ounce of gold has, at different times, matched a modest pile of silver or a very large one.

The two metals simply behave differently. Gold is held mainly as a store of value, in bars, coins, jewellery and central bank reserves. Silver is bought as bullion too, but a large share goes into industry, from electronics to solar panels. Far more silver is mined each year than gold, and the silver market is much smaller in value, so its price tends to swing harder in both directions. Our guide on where silver is used besides bullion goes into the industrial side.

Why people keep an eye on the ratio

Mostly it gives a quick read on how the two metals are doing against each other, without currency moves muddying the picture. If you hold both, or are weighing one against the other, it puts them on a single scale.

Some people compare today's figure with its own history and call silver cheap or dear relative to gold on that basis. Others switch between the metals when the ratio moves. Customers ask us about these habits, so we explain them, but we don't recommend them. No level of the ratio is sure to mark a turn, and past ranges tell you nothing certain about future ones.

The ratio is also read as a mood gauge. In some periods of market stress it has widened, as gold held up better than silver. That has happened often enough to be talked about, and broken down often enough that it is no rule. For the wider forces behind price moves, see our guide on what moves the gold price.

What the ratio does not tell you

It says nothing about whether either metal is rising or falling in dollar terms. Both can drop while the ratio sits still. Both can climb while it jumps around.

It is also worked out from spot prices, and nobody buys a bar at spot. Retail prices carry a premium, and on silver that premium is usually larger relative to the metal's value than on gold. Silver is bulky, so making, shipping and storing it costs more for each dollar of metal. The ratio on a chart is therefore not quite the ratio you meet at a shop counter.

Switching one metal for the other has its own cost. You sell one and buy the other, so you cross the gap between buy and sell prices twice. Our guide on buy price and sell price explains how that gap works.

Using the ratio when you come to the counter

Our market page shows live gold and silver prices and charts, so you can work out the ratio whenever you like. Our product prices follow the live world spot price through the day, with the premium shown openly on every product page. At weekends the world market is closed and we sell at the last closing price, so the spot figures, and the ratio you get from them, stay put until trading reopens.

The two metals also feel very different to own. The same value in silver weighs many times more than in gold and takes far more space, which you will notice quickly in an HDB flat. In Singapore, both can be GST-exempt as investment precious metals if they meet the IRAS conditions, which include at least 99.5% purity for gold and 99.9% for silver, in bar, wafer or coin form. The IRAS e-Tax guide sets out the full rules.

If you bring metal in to sell, the ratio plays no part in what we pay. Each piece is tested at the counter and the final amount is set at that moment's price for that metal.