DEFINITION of 'Gold/Silver Ratio'
A ratio (X:1), demonstrating how many ounces of silver (X) it takes to purchase one ounce of gold – the fixed variable. Investors use the fluctuating ratio to evaluate the relative value of silver, which determines if it's an optimal time to purchase gold or silver. It also helps investors diversify their precious-metal holdings.
BREAKING DOWN 'Gold/Silver Ratio'
Gold's value is highly dependent on its relative scarcity as a good. It is a highly speculative market; however, unlike other speculative markets (such as the oil market) gold is non-consumable, meaning that even when used (e.g. in jewelery), its value can be recovered. Gold has traditionally been viewed as a "safe haven" of value for investors when currency markets are experiencing high rates of volatility.