The ratio is calculated by dividing the current gold price per ounce by the current silver price per ounce. And I said I expect it to trend downward over time.
In fact, I expect this ratio to head much lower, which means big opportunities in silver investing...
Let's take a look at the reasons why the gold/silver ratio will drop - and what it means for silver prices in particular.
The Gold/Silver Ratio Since the Financial Crisis
During the 2008-2009 financial crisis, the gold price dropped to $720 and the silver price to $9, spiking the gold/silver ratio to 80. This level had only been seen once before in this current metals bull market, which began in 2001.
Since then, there's been no lack of action, to be sure.
From the lows of $9 for silver in 2008, it steadily worked its way up to about $18 over two years. Then it exploded even higher.
In fall 2010, as silver still traded at $21, I made the case for silver surging much higher to reach near the $27 level, a triple from its 2008 lows.
Silver did make it to $27, but it didn't stop there - not even close.
Instead, silver prices climbed all the way to $49.76 by April 2011, eclipsing their previous high of $49.25 (reached in 1980) in a short span of just seven months.
But since then silver's been in a major correction/consolidation phase.
After gold peaked a few months later in September 2011 at $1,900, silver traded sideways in the $25 to $35 range. When gold sold off strongly in early 2013, silver followed, eventually trading in a range between $18 and $23.
More recently, silver has again taken its cue from gold, weakening to just above the $17 level.
But silver's future looks very bright - and here's why...
Without a doubt, gold remains in a long-term secular bull, and silver is always close behind.
Right now, the gold/silver ratio is at a historically high level of 71. But odds are good we'll soon trend back toward the average, which is 55 so far for this bull.
If gold doesn't move from its current level, a ratio of 55 would mean silver trading close to $23, which is more than a 30% gain from here.
But longer term, I expect much higher silver prices. And I'm in very good company.
Why Silver Prices Will Soar
Eric Sprott, billionaire Canadian resource investor and founder of Sprott Asset Management, really knows precious metals.
In December 2012, he told Capital Account's Lauren Lyster that silver would outshine gold as the investment of this decade.
Sprott expects the gold/silver ratio to bottom out around 16 as this secular bull matures.
I believe gold will eventually reach a level of $5,000. I also expect the gold/silver ratio will bottom out around 20.
Doing the math, that works out to the silver price eventually reaching $250 per ounce.
I know that looks like a long way off from its current price of $17.50. But consider that silver started this secular bull at $4 and worked its way to $49, generating a return of more than 1,200%.
With that in mind, $250 per ounce of silver looks a lot more achievable.
Remember to keep a close eye on the gold/silver ratio. It could prove an invaluable cue to where precious metals prices are headed.
More from Peter Krauth: Gold miner exchange-traded funds typically take a simple market-cap-weighting approach to allocating holdings, but this isn't necessarily the best strategy. This new gold miner ETF takes a different approach - and it promises much better returns...