Gold to Silver Ratio

by Tom Huggens, 595 days ago

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The Gold-Silver Ratio measures the number of ounces of silver it takes to buy one ounce of gold. The Gold-Silver Ratio current value is near 62; it used to be 51 in 2007 and 12.5 in 323 BC.

The Gold Silver ratio is not well known for the average trader; however it is used by many professionals who seek for extreme values of this ratio. The ratio of gold to silver can be employed in many trading strategies, including arbitrage strategies, strategies using options, ETFs...
One trading strategy example is buying gold contracts when the ratio is low and then selling these contracts and buying silver contracts when the ratio become high. Another trading strategy implies the purchase of calls on gold and puts on silver when the ratio is low (and puts on gold and calls on silver when the ratio is high).

The current trading object does not calculate the Gold to Silver ratio; instead, it downloads futures continuous contracts historical data for the gold and silver commodities. The Gold symbol is "^Gold" and the Silver symbol is "^Silver". The data can then be used to create the Gold to Silver Ratio.
- First of all, make sure the data is there, as sometimes I have noticed that it isn't downloaded. In this case, simply restart the download and everything should be ok.
- Next, create a composite item and set "^Gold" as the unique symbol for this composite.
- Create the gold silver ratio formula by taping the following line:
composite = close / GetSeries("^Silver", close);
// Close refers to the close price of the Gold continuous futures contract.
- Save this item to create your composite. Now each time you use this downloader to get EOD data for these commodities, the Gold-Silver ratio composite is automatically updated and recalculated with the new data.