The Importance of the Historical Ratio of Gold and Silver


Today, gold is at $1615 and silver is at $40 an ounce.  This is a ratio of 40 ounces of silver to one ounce of gold.  So what is wrong with this picture?  The only way to see through these numbers and realize the true impact of the ratio of gold to silver is to take a walk back through history.

“For the first two thousand years that gold and silver were the primary form of money across the globe, the exchange rate between the two metals averaged 12 ounces of silver to one ounce of gold.  In other wards silver’s value was 1/12 that of gold.  Of course it would vary by region and time period.  In China in during the Ming Dynasty for instance the exchange rate was 4 ounces of silver to 1 ounce of gold, and in ancient Egypt silver had the same value as gold; but, on the average, the ratio has been about 12 to 1.”—Mark Maloney, Gold and Silver Expert for the Rich Dad Poor Dad Advisory series.

Another important fact to know is that the United States pegged their own ratio of silver to gold at 16 ounces of silver to 1 ounce of gold when the United States was still on the gold and silver standard.  So what is the implication of all these ratios?  Ever since 1973 when the United States went of the gold standard, the ratio of gold to silver has gone crazy with the highest ratio of gold to silver being over 80 ounces of silver to one ounce of gold.  The current ratio is 42 ounces of silver to 1 ounce of Gold?

So what is the practical impact of all this?  If silver were to return to its 16 to 1 ratio in the United States, silver would currently be worth $101 an ounce!  If silver returned to its 12 to 1 ratio we would see the price at $134 an ounce!  If this occurred we would see a 347.5% rate of return.  This is one of the reasons why I am much more bullish on silver in the long-term than I am gold and believe that $100 silver is a no brainer.

Josh Renfro

President & Founder

Lone Star Bullion LLC