Trade the Gold to Silver Ratio

Miles Franklin sponsored this article by Gary Christenson, the Deviant Investor.

  • Buy gold for insurance against fiscal and monetary predations of central bankers, commercial banking and government. Yes – certainly!
  • Buy silver for insurance, profit and beautiful coins. Yes!
  • Buy both to own real money that has no counter-party risk.

WHEN?

  • The simple answer is buy silver when the gold to silver ratio (G/S) is high and buy gold when the ratio is low. The problem is defining “low” and “high.”
  • Silver prices move higher and lower, faster and farther, than gold prices so the ratio moved between 20 and 100 over the past 50 years. The historical ratio is lower, ten to twenty.

PURPOSE?

  • Maintain physical ownership of precious metals which have no counter-party risk.
  • Enlarge your stacks of silver and gold by trading between gold and silver timed with ratio extremes.
  • Sleep well knowing you own real money – gold and silver – not dodgy over-priced stocks at the end of a gigantic credit expansion and stock boom.

REALLY? SHOW ME!

The above graph of the ratio (weekly data) shows an idealized scenario for trading between gold and silver. Buy gold when the ratio is low and silver is relatively expensive. Sell gold when the ratio is high and silver is relatively inexpensive. The red arrows show 13 trades since 1971 that could have drastically increased total ounces in your metal stacks.

Begin in 1971 with $1,000 invested into gold – 23 ounces. Trade back and forth between gold and silver. By late 2018 your $1,000 in gold grew to over 177,000 ounces of silver, worth over $2,000,000 in a perfect trading world.

These theoretical trades were executed with perfect hindsight – about as likely as:

  • Everyone is above average.
  • The wind is always at your back.
  • Politicians are truthful and care about you.
  • Central bankers are good-hearted souls motivated to protect the best interests of common people.
  • Debt and deficits don’t matter.
  • The COMEX is an honest physical exchange.

IN A MORE REAL WORLD:

  • The future is unknowable.
  • Timing a market is difficult.
  • Greed and fear inhibit making good decisions.
  • Trend changes are difficult to see in real time.
  • All markets are manipulated.
  • Every transaction includes a cost.

TRADING IS BENEFICIAL EVEN IN THE REAL WORLD!

  • Buy silver when the ratio is high—40s before 1980 bubble and over 60 after the 1980 bubble. Sell silver and buy gold when the ratio is low—below 30 before the bubble and below 50 after the bubble. AND…
  • Calculate the five week moving average of the ratio. Trade positions only after the ratio has FALLEN BELOW moving average highs or CROSSED ABOVE moving average lows in the ratio. AND…
  • Calculate the 12 period Relative Strength Index (RSI). Trade positions only after the RSI has reached extreme levels—below 25 or above 75—and reversed. AND…
  • Assume each trade costs 5 percent in transaction expenses.
  • Taxes on income are NOT considered.

This simple trading strategy is less emotional because it’s mechanical. Other more sophisticated systems are possible.

Using this simple system the trades are:

Begin with $1,000 in gold in 1971 – 23 ounces. Trade weekly closing prices 15 times in 40+ years based on the above (or similar) rules. Your stash grows to over 34,000 ounces of silver, worth about $500,000, after transaction costs. This is a good increase but far less than ideal trades made with hindsight.

WHY?

  • Gold and silver prices have risen in 48 years because the banking cartel devalued dollars. Higher prices and further dollar devaluations are inevitable.
  • Each trade roughly doubled total ounces of metal. For perspective, ten doubles creates a 1,024 factor increase.

Even facing real world difficulties your stack of metal will increase with careful exchanges between gold and silver every two to four years when the G/S ratio moves to extremes.

Miles Franklin discussed gold to silver exchanges and the ratio here and here. The current ratio is 85—high. An exchange from gold into silver remains sensible at this ratio.

Call Miles Franklin at 1–800–822-8080 and exchange gold for underpriced silver. Tell them you agree with the Deviant Investor.

Keep stacking!

The Deviant Investor

2 thoughts on “Trade the Gold to Silver Ratio

  1. actually a smart investor will take what you said and use it on the market! today sell everything and buy gold and silver. hold until the market crashes its 60+% then metal will be worth 100% more and you can now buy back into the market hopefully gold backed (if not wait) then your in at the bottom of a honest real market again! so take your money you idiots!!!! or your going to be wiped out with the rest of them!!!


  2. I’ve been (in) since 9-12-2001… I was writing my book, and making the same
    predictions as Mike Maloney , two years before he even thought of a book.
    The PM market was simple to navigate until 2011 when JP MORGAN dumped
    $25 billion in paper gold , and squashed any free market mechanics that were
    left… What I see happening now, is a staged confrontation between Asia and the West… the outcome has been predetermined in favor of Russia, and Putin is anything but an adversary to the central banking cartel… The amount
    of infrastructure suddenly being announced by Putin, is driven by Western
    money seeking safe haven from “America”…. `Putin is an enemy of the American people, and best friend of the Western counterfeiters…
    I was fooled for some time by this carefully constructed Boolean fantasy, but
    was always reminded that Putin made no less than 50 threats he never made
    good on since before the invasion of Ukraine… and now, after 5 years of crippling sanctions, what do we have? a Russia that’s building 2 multi billion dollar pipe lines, a new airline manufacturer to compete with airbus and Boeing, Hyudia dealers setting up to sell cars in Russia, new fighter planes
    and advanced weapons , and a (HIT LIST) for which US cities he will obliterate if one shot is fired across the Russian border…
    If there is to be a revival of PM (which I now doubt will happen in the US),
    it will be denominated in carbon credits , which are being rammed down the throats of AmeriKans (one city , one bribe, at a time)… I no longer expect
    any sanity from the American people… the movie “bird box” is a must watch
    metaphor that would better be named “The Matrix unplugged”… it’s a dead accurate analogy of three generations of American idiots, coming face to face
    with three generations of failed responsibility (disguised as monsters)… only those who close their eyes to the ugly reality overt suicide…
    I predicted mass suicides 15 years ago after witnessing the incredulous behavior of the American idiot…. we are very near a giant balloon payment
    on reality… lots of people will fall into the bird box scenario… many all ready
    have…

    https://www.prnewswire.com/news-releases/number-of-americans-dying-due-to-alcohol-drugs-and-suicide-is-at-an-all-time-high-300806379.html


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