Gold - Silver ratio

[PiyushChaudhry]

Gold-Silver Ratio: Asset Allocation between the Two

Gold / Silver ratio (GSR) = price of $Gold / price of $Silver

For Example: if price of $Gold = 4800, and price of $Silver = 80, then Gold - Silver ratio = 4800 / 80 = 60.

When prices of both these assets move, the ratio also then moves.

One can then time, which asset to allocate more capital to based on the ratio.

The ratio’s Mean as well as +/- one, two and three standard deviations (σ) have been taken, on the lines of Normal Distribution. The Timing and asset allocation can be done as follows:

The GSR currently reads 62.7x, sitting 0.46σ below the 2000-2026 Mean of 68.9x. This places Silver in mild relative-value territory. The allocation rule is straightforward: above +2σ (95x), the asset allocation favors overweight Silver. Between +1σ and +2σ (82-95x), tends to favour Silver. Within ±1σ (55-82x), hold a balanced split.

Between -1σ and -2σ (42-55x), tends to favour Gold. Below -2σ (42x), the asset allocation favors overweight Gold. At current levels, they are more or less equal weight. Rebalance, as the ratio crosses Standard Deviation thresholds.

[DSingh]

@PiyushChaudhry Not sure how many can understand your language in the post. If possible kindly keep the explanation non-mathematical in the beginning with minimum abbreviations. Keep up the good work!

[PiyushChaudhry]

Please recheck if the added introduction solves the problem and makes it understandable.

Let me know if you have any questions.

[DSingh]

@PiyushChaudhry Introduction clearly explains the intent now but still, kindly mention that lowercase sigma is standard deviation. Also, standard deviation explanation is still lacking a bit clarity. May be a table can help as nobody will going to read the math if it going to have anything other than plus or minus but a table can help to understand the effect of different standard deviation ranges.