Sign inCreate account
← Strategy library

Gold–Silver Ratio Reversiontwo metals, one number

Evidence: WeakProfessionalMetals · Spread

Divide the gold price by the silver price and you get a number that traders have watched for a century. When it is historically high, the trade is to sell gold and buy silver; when low, the reverse.

It is rated Weak and the reason is in the data rather than the logic. The ratio has no fixed level to revert to. It has spent decades drifting, and a rule built on 'unusually high' is a rule built on whichever window you chose to call normal.

It is here because it is a real, tradeable relative-value structure, and because the honest version of it is more useful than the confident version everyone else publishes.

Category
Metals · Spread
Timeframe
D1 · held weeks
Suitable pairs
XAUUSD and XAGUSD, traded as one position
Session
Daily close
Indicators / tools
The ratio series · its 50-day mean and standard deviation · both metals' ATR(14)

Valid setup

GD-04 · GOLD–SILVER RATIO REVERSION — VALID SETUP the ratio itself, plotted daily · the position is short gold and long silver, sized to equal dollar risk SHORT THE RATIO 78.51 80.43 82.35 84.27 86.19 88.11 90.03 TARGET = the mean, both legs closed together +3σ stop band / the mean +2σ — the signal line ENTRY = ratio more than 2σ above its own mean TARGET = the 50-day mean of the ratio STOP = one further σ against 1 2 3 4 86.10 82.47 88.59 ① The ratio starts stretching away from its mean ② Through 2σ — but the mean itself is drifting up ③ That drift is why this page is rated Weak ④ Short gold, long silver — equal dollar risk ⑤ Stop at one more σ; hard time stop at 40 days ⑥ Out at the mean, both legs at once

Exact rules

Entry

  • Compute the ratio daily: gold price ÷ silver price.
  • Signal: the ratio is more than 2 standard deviations from its own 50-day mean.
  • Above: short gold, long silver. Below: the reverse. Both legs, sized to equal dollar risk, not equal lots — silver's volatility is roughly twice gold's and equal lots is a silver position with a gold-shaped hedge attached.
  • One spread at a time. No adding when it goes further away from the mean, which is exactly what it will do.

Stop loss

  • On the ratio, not on either leg: exit if the ratio moves a further 1 standard deviation against you.
  • Hard time stop at forty trading days. A ratio that has not reverted in two months is telling you the mean has moved.
  • Risk 0.5% across the whole spread, counting both legs together.

Take profit / exit

  • The 50-day mean of the ratio. Not a partial reversion, not the opposite extreme.
  • Exit both legs at the same time. A spread trade with one leg closed is a directional metals position you did not decide to take.
  • Financing costs both legs for weeks. Include them before you decide this is worth doing.

Build Gold–Silver Ratio Reversion

Reading this page is free and always will be. Taking it is what costs — the complete MQL5 for the rules above, yours to keep, permanently. Five of them cost $10 and they never expire.

Sign inWhat it costs

More from Gold & metals

Real-Yield Regime Gategold's most reliable relationship, used as a filterRisk-Off Safe Haven Entrybuying gold on the day equities breakDollar-Inverse Confirmationtwo charts have to agree before there is a trade

Trading carries risk and most retail accounts lose money. Nothing on this page is financial advice or a recommendation to trade. The chart is an illustration of the rules on constructed candles — it is not a record of a trade and not a backtest.