What is the gold silver ratio saying?

Above Rs 34,000 per 10 grams, the price of gold has gone up nearly 25% in couple of months! Given the possibility of global economic crisis and war with Syria, the possibility of investors rushing to the safe haven asset seems more real. Even the so-called gold bears, who were sounding its doom few months back, have now changed opinion.

But should one only focus on gold? Would other precious metals, for instance silver, have some upside? Well, the gold silver ratio could answer that to an extent. As per Investopedia, the ratio shows how many ounces of silver it takes to purchase one ounce of gold. The ratio between gold and silver over the past 50 years has averaged around 50. That is, on an average at least 50 ounces of silver is required to buy an ounce of gold. Hence, one can conclude that if the ratio is above 50, silver is a good buy. As per goldprice.org, the ratio currently stands at 58. So, probably investors should be looking at precious metals beyond gold.

Having said that, like any other investment, the exposure to precious metals should be limited. Also instead of looking for short term gains, they should be held in the portfolio as a hedge against inflation and currency risks.

Source: Goldprice.org