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Gold to Silver Ratio

by Tom Huggens, 3332 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.

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Type: Download Script

Object ID: 698


Country:
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Market: Futures Market

Style:
Technical Analysis

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Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.