Using the Gold-Silver Ratio for Relative-Value Perpetual Trades
Summary
The document explains the gold-silver ratio (GSR), calculated by dividing gold’s price per ounce by silver’s. It presents high readings as possible evidence that silver is cheap relative to gold and low readings as possible evidence that silver is expensive. The ratio is framed as a measure of relative value, not a forecast of either metal’s absolute direction. Industrial demand, safe-haven flows, dollar strength, real interest rates, supply conditions, and futures speculation can all move it.
For perpetual futures, the proposed mean-reversion approach pairs a long position in the relatively undervalued metal with a short in the other, with notionals matched to focus on relative performance. The article also describes tilting exposure toward one metal, consulting macroeconomic indicators and funding rates, and watching event-driven moves. It recommends controlling leverage, sizing, stops, mark-price exposure, and accumulated funding costs. No historical test or performance evidence is supplied, and extreme ratios can persist; the examples are analysis ideas rather than validated trading rules.
Key ideas
- The gold-silver ratio compares gold and silver prices per ounce and describes relative value rather than absolute price direction.
- A high ratio may suggest silver is cheap relative to gold, while a low ratio may suggest the reverse.
- Industrial demand, risk sentiment, currency and rate changes, supply, and speculation can influence the ratio.
- A paired long-short position can seek mean reversion while reducing broad directional exposure.
- Leverage, matched notionals, stops, and perpetual funding costs require active risk management.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.