When discussing precious metals, an important piece of information to consider is the gold to silver ratio, otherwise known as the mint ratio. The mint ratio is simply the price of one ounce of gold divided by the price of one ounce of silver. Portfolio owners can use the ratio as an exchange rate to plan their asset allocation in their portfolio.
According to Investopedia, when gold is trading at $500 per ounce and silver is trading at $5, the gold to silver ratio would be 100 to 1. The gold to silver ratio fluctuates in modern times and rarely remains the same. This is because the prices of these precious metals change daily. In 1792, the U.S. government fixed the ratio at 15 to 1, with the Coinage Act signed by President George Washington.
This changed in the 20th century, when nations moved away from the bi-metallic currency and gold standard due to gold shortages. Since then, prices of silver and gold are independent of one another. Over the past ten years, this ratio has fluctuated. Keeping a close eye on the mint ratio can be beneficial to those who want to broaden their portfolios.
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