When is the right time to buy gold? Is it wise to trade my gold during this time? Am I getting the right price for my gold?
These are the common questions when you are either buying gold or selling it. The answer is often complicated. But, it doesn’t have to be. The market keeps fluctuating and it gets hard to keep a track of prices and understand if the price is right.
People usually talk about the gold to silver ratio and how it helps to make the right decision. But, what is it really?
It is a widely used indicator when making investments in either of the two metals. The ratio essentially helps one in deciding when to buy/sell Gold/Silver or when one can be exchanged for the other.
Gold to Silver ratio indicates how many ounces of silver it takes to buy 1 ounce of gold at a given point of time.
It is calculated as:
Spot Price of Gold ÷ Spot Price Of Silver = Gold:Silver Ratio
For example, if the ratio is 85:1, it means that one needs 85 ounces of silver to buy 1 ounce of gold. Now, the question is which metal is preferred at a given ratio?
Generally, if the ratio is above 80, one should ideally buy silver because it is undervalued and if it drops below that, gold is a better choice.
The basic instinct of buying and selling either of the metal depends from person to person as per the needs and purpose of their investments. However, the ratio helps in providing the basis for such decisions and keep a check that you have made the right choice.