The gold to silver ratio is the actual representation of the amount of silver ounces it would variably take to purchase one ounce of precious gold. The aforementioned ratio has the leverage of wiping out the dollar value aspect of taking a more solid position on either of the two precious metals. Spread betting on the two valuable commodities, investors are essentially taking a position on the metal ratio. The primary demand for silver may certainly rise however if the US dollar dominates the economic market then price gains are left crippled. But the position on gold-silver ratio is carefully examined; the dollar denomination feature can be disregarded.
During the days of trade in early civilisations such as in Ancient Egypt, the Egyptians were the first to have used a bi-metallic currency. With gold-silver ratio running at 13:3 basically traders utilised 10 silver coins in order to buy one gold coin. This metal currency was devised by Croesus of Lydia and was used then on for several millennia; the ironic truth behind such trading was not based on the analysis of supply and demand but practically rooted in the Egyptian calculated mysticism that the silver moon moves 13:3 faster across the sky than the golden sun. The ratio of sliver-gold then held until most of the 19th century.
To improve the demand, several influential third party developers in the US and China recently boosted silver which early this 2012 gold has regained its 12 per cent year to date while silver gained 27 per cent in the same period. Although gold has less industrial use as a crude commodity, unlike silver which is currently making its use as an essential ingredient in many fields of applications such as in food and drugs, medical applications and most especially nanotechnology, the interest of investors in the long run could definitely exceed demand over supply of silver. It is of course prudent to take note that silver is but a portion of the entire market of gold, so should there be a slight move in gold, the entire silver market is also affected.
Investors might find it too much of a gamble using the actual commodity but with spread betting and/or CFDs (contract for difference it might come out relatively easier. It should however be considered that providers do not offer the said ratio as a separate quotation therefore traders need to take two sides; one for gold and another for silver. Paying for the stop loss on each trade should also be taken into account. Another option could be through the use of the new gold-silver ratio exchange-traded funds (ETF) that are rising in popularity. One of the pioneers in this new exchange, Horizon spearheaded its Comex long gold/short silver ETF and its long silver/short gold ETF one of the firsts commodity spread ETF that led to a lower cost efficient way of pair-trading.