What Is the Gold-Silver Ratio and How Can Investors Use the Metric?

Gold and silver witnessed a record run in 2025 following a shift in preferences for commodities on account of major geopolitical uncertainties and persistent trade tensions. The investor interest in commodities, such as gold and silver is expected to remain consistent in 2026.

On January 2, 2026, spot gold was trading at $4,383.82 per troy ounce and spot silver at $72.63 per ounce in the international market. Gold Futures was trading at $4,402.30, up by $61.2 or 1.41 per cent on the COMEX. Closer home, on the Multi Commodity Exchange (MCX), Gold Futures traded at Rs 1,36,822 per 10 grams, up by 0.75 per cent, and Silver Futures at Rs 2,44,243, up by 3.55 per cent. Amid this sustained upward momentum, it is important for investors to know about the gold and silver ratio to make more informed decisions while investing in commodities.

What is Gold-Silver Ratio

The gold-silver ratio is a mathematical calculation which helps in finding out the relative value between the two metals. To determine the ratio, the price of gold is divided by the price of silver. The ratio is shaped by the market demand for the two metals and offers insights into the valuation of the metals. The ratio can help investors in understanding which metal is currently “cheaper” relative to the other:

Following the continuation of gold and silver’s rally on January 2, the gold silver ratio is at 60:1 in the international market, and 57:1 in the domestic market. The current ratio indicates that it will take 60 ounces of silver to purchase a single ounce of gold and 57 grams of silver to purchase one gram of gold. Notably, this is a stark drop from the 100:1 ratio seen in early 2025.

Typically a rising ratio (80 or 100) indicates that gold is becoming expensive or silver is becoming undervalued. On the other hand, a declining ratio towards 40 or 50 is indicative of silver outperforming gold and becoming overvalued. Historically, investors tend to rotate their funds back into gold from silver when the ratio declines.

On the macroeconomic front, a very high gold to silver ratio is also indicative of economic “fear” and uncertainty. During such phases, people tend to turn to safe haven assets and buy gold for its ability to act as a hedge against volatility.

On the other hand, a falling ratio can reflect “industrial optimism”, as it indicates a high demand for silver. Notably, industrial demand has contributed  significantly to silver’s price rise, as the precious metal has many applications in new and emerging technologies, such as solar energy, and the hardware and data centres set up for the adoption of artificial intelligence (AI).

How Does Gold Silver Ratio Help Investors

For investors, the ratio can be a useful tool for making informed and data-led investments as opposed to simply chasing momentum and buying gold or silver when prices surge.

Finding Entry Points

The Gold Silver ratio can aid investors in deciding which commodity they should purchase. When the ratio is in high double digits or triple digits, a retail investor might choose to buy silver over gold.

Elsewhere, if the ratio is declining, indicating a decreasing gap between gold and silver prices, gold might offer a potentially stable value.

Risk Management

Historically, the performance of silver has remained volatile. In the past four days, physical silver prices have slipped by over 8 per cent to Rs 2.42 lakh per kg on January 2 compared to Rs 2,63,150 per kg on December 27.

On the other hand, gold prices have declined by 4.30 per cent to Rs 1,36,200 per 10 grams in the same time period. By monitoring the ratio, investors can look for signals which indicate that silver’s price has become “stretched”.

Contrarian Strategy

Investors are often lured by the momentum with which a commodity has moved recently. This leads them to buy the commodity and follow the larger trend in the market, leading to them buying a commodity when everyone is buying it as well.

Using the gold silver ratio, investors can try out a “contrarian” strategy, wherein they end up buying what is unpopular and selling what is hyped. This approach can, in turn, aid investors in avoiding the trap of buying at the peak of a rally and panic-selling their holdings when the price falls.