Back last June I scribbled up a quick explanation about this ratio chart. It still holds true today (and will do in 10 years time, for that matter) so by way of a reminder and easy content for this lazy blogger, here's an excerpt from it again:
"Watching the GSR is a good way of noting fear versus greed...to a certain extent that is. Basically, the more nervous people get, the more they'll prefer to hold gold over silver. This is because gold is money, gold is the long-standing store of wealth, gold is the safe haven metal etc etc.
And silver is......well, it's silver. The pretend precious metal. The one that claims brotherhood with gold but is mostly produced as a by-product of base metals (zinc and lead, usually). Neither fish nor fowl, silver maintains a positive beta relationship to gold.
When times are good, silver will appreciate faster than gold as people buy into the precious metals side of the metal. When times are nervy, silver exasperates its fan club (the dreaded silverbugs; people that make goldbugs look normal) and sells off at a faster rate than gold (supposedly due to Goldman Sachs using massive put positions on Comex and despite being the metal about to be used in the new Mexican currency, or the Amero, or whatever other tinfoilhat theory is fashionable).
All this can be summed up in one simple phrase: People trust gold more than silver.