The gold-silver ratio is the number of ounces of silver it takes in order to buy one ounce of gold. On the basis of this ratio, silver looks cheap at current prices according to research presented by Baird & Co. The gold-silver ratio is currently at 81, much higher than the average of the ratio over 226 years. 

A ratio of approximately 80 has predicted a rally in the price of silver historically according to Baird & Co. 

Silver's property as an industrial as well as precious metal is another factor in calculating it's value, connecting it to the cyclical nature of commodities and increasing it's volatility. 

Solar energy and semi-conductors are some of the uses of silver in industrial applications, both growing sectors. 

Silver producers are producing less as the world's three largest producers, Mexico, Peru and Chile have seen their production decreased by 6% over the past 2 years. 

While this all seems as though it points to silver as a buying opportunity, Russ Mould of AJ Bell says:

"Keen commodity watchers will be well aware of the gold-silver ratio and how cheap silver looks in comparison to its fellow precious metal. But any purchase of silver must be made with wider asset allocation."

ETFs and funds that invest in the relevant sector are some of the ways that investors can gain exposure without physically owning the commodity. 

One other factor to consider with regard to the gold-silver ratio is that the correction in the disparity from the average may be achieved by gold falling rather than silver rising. 

Remember that it's important to invest in a diversified fashion and that holding too much of your money or investments in one sector, commodity or geographical area is not recommended. Contact Westminster Wealth today to put a diversified investment strategy in place.

The value of investments and income from them may go down as well as up and you may not get back the original amount invested. 

Information is based on our current understanding of taxation legislation and regulations which is subject to change. 

Past performance is not a reliable indicator of future performance.