How to make sense of the gold-to-silver ratio

The gold to silver ratio (GSR) measures the relative money flow between gold and silver. Specifically, GSR tracks acceleration/deceleration of liquidity entering the financial system. Mathematicians would call it the second derivative of the liquidity function. I know it as the balance between injection (euphoria) and hemorrhage (fear) phases.

Gold to Silver Ratio (GSR), Monthly Average Price:


Headline: How to make sense of the gold-to-silver ratio

“Some traders look at the gold-silver ratio as a way to determine if one commodity is over or undervalued relative to [the] other,” said Paul Simon, chief investment officer at Tactical Allocation Group.

“This can open up statistical-arbitrage opportunities, where a trader may try shorting the overvalued commodity and buying the undervalued commodity, with the hope of profiting from the reversion to the mean,” he said.

Source: marketwatch.com