Despite claims from some analysts that it is a relic of the past, a recent study found that the gold-silver ratio remains a relevant technical indicator that is still useful for forecasting the trajectory of the silver market.

The study was featured in the latest edition of the Silver Institute's Silver News report, alongside coverage of recent advances in silver technology and developments in the silver market. The ratio is one of the oldest trading benchmarks in precious metals markets, dating back centuries to when many currencies were defined in fixed weights of the two metals — which is why some modern analysts dismiss it as outdated even as others continue to track it.

The gold-silver ratio indicates how many ounces of silver it takes to buy one ounce of gold at current spot prices — in effect, the price of gold expressed in ounces of silver.

Mean Reversion Around 60-1

According to the study, the gold-silver ratio tends to revert to a mean of around 60-1. When the ratio rises well above its historical average, it signals that silver is underpriced relative to gold, with a strong possibility that silver will go on a bull run to close that gap. Conversely, when the ratio drops significantly below 60-1, it tends to revert to the mean through a silver selloff or a gold price surge.

The gold-silver ratio currently sits at around 67-1.

According to the Silver Institute: "The tendency for the gold-silver ratio cyclically to rise above and fall below its long-run equilibrium has not changed. Therefore, even if in future the outcomes will be skewed higher by the structural change supported by heavy official sector gold demand, dips well below equilibrium will also occur."

Based on the data, when the gold-silver ratio rises roughly 20 percent above its mean, it eventually moves back — often very quickly, overshooting the average in the process.

Historical episodes illustrate this pattern. The gold-silver ratio fell to 30-1 in 2011 after rising to over 80-1 during the money creation of the Great Recession that followed the 2008 financial crisis. In 2020, the ratio set a record of 123-1 as COVID hysteria gripped the world, then plunged to around 60-1 as central banks cranked up the money-creation machine to cope with governments shutting down economies.

According to the Silver Institute, the ratio of above-ground gold to silver bullion stocks acts in tandem with the ratio of gold-silver investment demand. "The report noted that recently the higher gold price has been powered by official-sector net sales or purchases that have pushed the gold-silver ratio above the long-run 60-1 ratio. Nonetheless, the ratio is still expected to revert to the mean of about 60 to 1." That official-sector demand has become a significant force in gold markets in recent years, as central banks have shifted from net sellers to sustained net buyers of the metal — a structural change the study argues could keep the ratio's swings skewed higher even as mean reversion persists.

For readers tracking the silver market, the study's implication is straightforward: the ratio itself, rather than headline prices alone, offers a historical benchmark for gauging when one metal has moved unusually far relative to the other.

Silver Technology Developments

The Silver Institute also reported several technological developments involving silver — a reminder that beyond its monetary and investment role, silver's industrial and biomedical applications remain a key driver of demand for the metal.

Safer ethylene separation: Researchers at Hanyang University in South Korea found that silver ions used in a process to separate ethylene from propane — a process that carried a risk of explosion — can be replaced with metallic silver nanoparticles. This form of silver is more stable and less likely to react with chemicals such as acetylene, lowering the risk of explosion.

Bedside drug dosing: Doctors have discovered that nanosilver can help measure the correct medication dosages for individual patients. Nanosilver is often used in biological sensors because it can naturally boost the weak reflected light-wave signals coming from drug molecules. These signals carry unique signatures that tell laser-powered readers how much of a drug is present and what kind it is. Beyond determining a drug's best dosages and possible side effects, the light-based method is fast and can be performed at a patient's bedside, replacing slow lab work.

Stain-free cavity prevention: Applying Silver Diamine Fluoride (SDF) to children's teeth has been shown to prevent cavities, but it can leave dark stains. New research suggests that "nanosilver fluoride" (NSF) might be just as effective without staining. According to a report in the journal BMC Oral Health: "Incorporating silver nanoparticles, NSF, retains the advantageous preventive; this method often leaves dark stains on youngsters' teeth."

Testing silver by smell: Pure silver and sterling silver have no odor, but sniffing a silver object can indicate whether it is pure. "If you smell metal, like copper, which has a distinct odor, then the item in question is not pure silver. Zinc, brass, and steel have their own particular smells. Even if an item has a thin layer of silver coating, the underlying metal will usually still give off a metallic scent, suggesting that it is not pure silver."

Wearable sensor substrate: Engineers from the College of Design and Engineering at the National University of Singapore have developed technology that could lead to more flexible and durable wearable sensors. The soft, stretchable substrate repairs itself, firmly grips metal conductors, and can be remolded or broken down after use. In tests, silver films for electrodes that pick up heart and muscle signals adhered three times more strongly to their substrate than other substances used to conduct electricity.

More silver in the sun: The sun may contain 55 percent more silver than astronomers previously believed. Scientists cannot collect samples from the sun to measure its silver content, but they can estimate its composition by studying the light waves it emits; every element has a unique wavelength. Researchers had struggled to reconcile the higher silver content they observed in material that fell from space. According to Swedish researchers using a supercomputer, the sun's rays — unbeknownst to astronomers — distorted the specific light waves that indicate how much silver was present.

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Mike Maharrey