Strategy · Inter-Commodity

GOLD/SILVER RATIO TRADE

NeutralDefined riskAdvanced

Overview

Trade the gold-to-silver ratio. Historically the ratio mean-reverts around 60-70; extremes above 90 or below 40 have historically produced clean rotation trades.

Setup

1.Pull the 50-year gold/silver ratio chart.
2.When ratio >85: long silver, short gold (silver outperforms in metals rallies).
3.When ratio <50: long gold, short silver.
4.Use equal-notional contracts (GC vs. SI) — one contract of GC = roughly 5 contracts of SI.
5.Hold weeks to months; ratio extremes resolve over quarters.
6.Take profit on a 20-30% ratio move in your direction.

Max profit

Ratio convergence of 20-30% × notional.

Max loss

Ratio can stretch further before mean reverting; stop at 2 SD beyond entry.

Breakeven

Entry ratio plus financing.

When to use

At historical ratio extremes with no obvious regime change.

When to avoid

When silver has unique industrial-demand stories distorting the ratio (PV cells, EVs).