Is gold and silver correlated?

A beta equal to 1.0 indicates that silver prices are strongly correlated with gold and have similar volatility. The gold-silver ratio is calculated by dividing the current price of gold by the current price of silver. This will show you which metal is increasing in value compared to the other. This requires buying gold put options and calls for silver when the ratio is high and quite the opposite when the ratio is low.

On the one hand, investors often pay a premium on the spot metal price of gold and silver coins due to manufacturing and distribution margins. Referring to the same point of focus as in the two previous charts, the gold/silver ratio is almost three times higher than it was a hundred years ago. However, as I mentioned earlier, gold remained in the system as money in extremis in central bank reserves even after 1973.The higher price of gold over time reflects the continued loss of value (purchasing power) of the US dollar. The discovery of massive amounts of silver in the Americas, combined with a series of successive government attempts to manipulate gold and silver prices, led to substantially greater volatility in the ratio throughout the 20th century.

Specifically, I look at which financial assets affect the price of silver and whether the price of silver affects other financial assets. This makes perfect sense because gold is real money and the original measure of the value of all goods and services; while the US dollar is a substitute for gold (i. Therefore, when the ratio is higher, and investors believe that it will fall along with the price of gold compared to silver, they can decide to buy silver and take a short position with the same amount of gold. We cannot compare gold and silver without first looking at the following chart of above ground gold stocks with the visible gold market.

The two times that silver prices generally moved in parallel with gold occurred when gold was responding — and catching up — to continued and cumulative losses in the purchasing power of the US dollar. The gold-silver ratio, also known as the coin ratio, refers to the relative value of one ounce of silver with an equal weight of gold. For those who are just starting to create their portfolios, the cost of silver can make it a better investment option. For gold there is always a large reserve and it never gets smaller, it is simply the owners of the reserves who change.