Trading silver for gold would be wise if the ratio of gold to silver is less than 16:1. Right now, it's about 40:1, so trading gold into silver makes more sense. When the ratio gets to 16:1, if you believe that history will repeat itself, then trade back into gold.
Basically, if you believe the historical ratios will return, if the ratio is 40:1, then either gold has to go down in value or silver has to jump in value. Either way, getting out of gold and into silver makes sense when the ratio is significantly higher than 16:1. If it were 10:1, then gold would have to increase or silver would have to decrease, making it the right time to trade silver for gold.
Another way to think of it, if the ratio is 32:1 (double the historical average) and you own 1 oz. of gold, you can trade that for 32 oz of silver. Now, either the value of gold has to go down, or the value of silver has to go up to get back to 16:1. When it does, you now have 32 oz of silver that you can trade for 2 oz of gold.
Last edited by 12fretter; 04-17-2011 at 03:57 PM.