What Ratios Can Tell Me When to Sell?

dollar, money, cash, dough, criteria, true moneyWatching key ratios can provide important indicators for when to hold and when to buy. These ratios help us understand when gold and/or silver are going from undervalued to overvalued. These ratios help us decide when we might want to switch some of our portfolio into another asset class. Here are the ratios you want to keep on your radar.

1. Gold to Silver Ratio
Lately, the ratio of gold to silver has been as high as 50:1, which means it takes 50 ounces of silver to buy one ounce of gold. When this drops to 12:1, we’d consider selling some of our silver and converting it into gold. When it takes less silver to buy an ounce of gold (like 12 ounces of silver to one ounce of gold), then gold is heading “lower” and silver is heading “higher.”

2. Median House to Silver Ratio
When you look at the median house price in the United States compared to silver in recent times, it takes somewhere around 5,000 ounces of silver to buy a median-priced house. When the ratio gets closer to 500:1, meaning 500 ounces of silver will buy a median-priced house, this would be an indicator that it may be time to switch from silver into residential real estate.

3. Dow to Gold Ratio
Another ratio we watch is the Dow/Gold Ratio. This is the ratio of the number of ounces of gold it takes to equal the Dow Jones Industrial Average. The Dow has been around 17,000, give or take, in the past couple years. Gold is around $1,200 per ounce, so the ratio is about 14:1. It takes fourteen ounces of gold to match the Dow. When the ratio is closer to 1:1 or even 2:1, we might consider selling some gold and buying equities.