Often traders in precious metals use the gold/silver ratio is one of the most popular measures. It measures the ratio of the dollar price of one ounce of gold to one ounce of silver. What does this ratio signify? Gold silver ratio is an equation between the price of gold and the price of silver. Currently, 1 oz (troy ounce) of gold trades at $1510 while 1 oz of silver trades in the international spot market at $18. Therefore gold/silver ratio of (1510 / 18) = 83.9. What this ratio effectively means is that one ounce of gold can be exchanged for 83.9 ounces of silver.

The gold/silver ratio normally ranges between 50 and 80 but there are occasions when the ratio diverges from this range by a big margin. For example, when the gold/silver ratio goes sharply above the 80 mark, it is economical for traders to convert their gold for more ounces of silver. This increases the demand for silver, raises the price of silver and brings down the gold/silver ratio back to the range. In case of a fall in the ratio well below the 50 mark, the traders prefer to convert silver into gold and that pushes up the gold/silver ratio back into the range.