200 Years (1181-1982) of U.S. Silver Prices
by Lcdr. David Williams (Ret.)
Silver has a long and interesting history.
Recent archaeological excavations of the ruins of the ancient Syrian cities of Mari and
Ebla, revealed that the merchants of those cities used silver and gold to facilitate
trade, in the ratio of 5 ounces of silver to 1 of gold, as early as about 3000 B.C. Over
the succeeding centuries the ratio has fluctuated widely, rising as high as 72 to 1 in the
depression year of 1932. On January 21, 1980, when both pre-cious metals reached their
highest prices since the Revolutionary War, the ratio was 17.7 to 1 (gold at $850, silver
at $48). It is currently, December 3, 1982 at 42.60 to 1 (gold at$44l .00, silver at
The American Revolutionary War was largely financed by the
issuance of paper money - Continental Currency. Professors Warren and Pearson of Cornell
University, in their classic book, Prices (1933) relate that on May 31, 1781 one dollar of
hard currency (silver-gold) exchanged for $400 to $1000 of paper money. That meant that
silver was worth $516 and gold $19,390 an ounce, at the then prevailing price at $1.29 an
ounce for silver and $19.39 an ounce for gold!
While silver was the money of every day life in the Greek
city states until the 6th Century B.C., the money of the Roman Empire consisted of crude
copper bars or ingots, which were weighed by the merchants at each transaction until the
reign of King Servius TuIlus (578-534 B.C.), who was the first ruler to stamp the weight
on these bars or ingots. Not until 269 B.C. was silver coined in Rome, at which time a
Bimetallic Standard was es-tablished between copper and silver.
DEBASEMENT OF CURRENCY CONTINUES
In England, silver had been the common measure of value up
to A. D. 1377, when silver and gold coins were used in the ratio of 16 to I up to 1816.
But France and most of the other European countries used a 15½ to 1 ratio, so silver
drifted to France and gold to England, until 1816 when England abandoned Bimetalism and
went on the Gold Standard. Most of the countries of Continental Europe began to demonetize
silver in 1873, which threw large amounts of it on the market as metal and decreased its
value. Incidentally, the pound sterling was an actual pound in weight of silver containing
5400 grains (troy) with a purity of 92.5%, or 4995 grains of pure silver (troy). But, then
came the debasement of the currency. Debasement of the pound sterling took two forms; some
kings reduced the weight of the coin, while others reduced the percentage of silver. Thus,
by the time of Queen Elizabeth's Great Recoinage Act of 1560, the weight of pure silver in
the pound sterling had fallen to 1761 grains (troy). The most rapid debasement of silver
came after a long period of declining commodity prices.
In the United States, the 15 to 1 ratio established in 1792
undervalued gold. So gold began to disappear from circulation. To correct this situation,
Congress on June 28, 1834 changed the ratio to 16 to I, at which rate gold was slightly
overvalued and silver undervalued. Hence, silver coins began to disappear from
circulation. Recognizing this fact of life, Congress by the Act of February 12, 1873 (the
"Crime of 1873") omitted the free coinage of silver privilege and omitted the
silver dollar from me coinage system. This put me U.S. on me Gold Standard (de-facto), but
it was not until the Gold Act of March 14, 1900, mat the Gold Standard became official (de
The cumulative effect of silver's devaluation in Europe and
the United States was a decline in the price of silver that was unprecedented in history.
From the 1873 price of $1.2995, silver fell to an all-time low of 24¢ in December 1932,
during the world-wide Depression of the 1930s. As the accompanying chart shows, silver
rose from 60¢ to 65¢ during 1900, as large quantities of silver were coined into Rupees
by the Indian Government. It then declined to 47¢ in 1902 as China dumped silver on the
market in order to raise money to pay the Boxer Rebellion Indemnity. A second rise
occurred to 72¢ in December 1906 due to Indian Government purchases. This rise was halted
by me Panic of 1907, and the price dropped to 47½¢ in December 1908. A third rise
brought the price up to 64¢ due to further Indian Government purchases. The following
decline, propelled by the outbreak of World War I, brought the price down to 46¢ in
August 1915. Thus we have a Triple Bottom, i.e., 47¢ in 1902, 47½¢ in 1905, 46¢ in
1915. This formed a broad base from which the price of silver shot up to a high of $1.37½
in October 1919. This phenomenal rise was due to three causes: (1) Increased demand from
the allies for silver coinage. (2) The purchase by the British Government of 300,000,000
ounces of silver for shipment to India during 1918-1919. (The natives distrusted British
paper money.) (3) Heavy Chinese buying after U.S. Government price restrictions were
lifted. See Chart.
U.S. ABANDONS GOW STANDARD
On April 19, 1933, the U.S. Government abandoned the
exist-ing Gold Standard and began to purchase foreign silver under the Silver Purchase Act
of June 19, 1934. As the U.S. Government increased its buying price for both domestic and
foreign silver, me price went up, aided by heavy speculative purchases, to 82¢ in April
1935. Profit taking by speculators and the lowering of Government buying prices brought
the price down to 35¢ in June 1939. On July 10, 1938 the U.S. Government buying price of
35¢ for foreign silver supported the price until November 28, 1941 when World War 2
purchases by industry raised the market to 35%¢, which the Office of Price
Adrninistration (OPA) on March 21, 1942 established as its ceiling price for foreign
On August 31, 1942 OPA raised me ceiling price of foreign
silver to 45¢. But on October 1, 1942, the War Production Board (WPB) restricted foreign
silver purchases to essential uses only, while the price for domestic silver was set at
71.11 cents. When WPB relinquished all control over silver prices on August 20, 1945, OPA
raised the ceiling price of foreign, domestic, and Treasury silver to 71.11 cents on
September 21, 1945. The price went up to 90¢ and on November 1, 1946 OPA abolished
ceiling prices, whereupon the price declined to 60¢ in June 1947. The price rose slowly
back to 90e in January 1951 under the impetus of the Korean War. The rise was stopped upon
the imposition of Wage and Price Controls in March 1951. Profit taking caused a decline to
82¢ in June 1952, from which level the price rose to 85e in January 1953 and continued at
that level to January 1955. It rose to 90½e in May 1955 and stayed at that level until
October 1956 when it rose fo 91.375¢ It fluctuated between 88.625¢ and 91.375¢ for the
next five years. It rose to $1.29 in July 1963 and remained at that level until May 1967.
In June 1963, the Silver Purchase Act of 1934 and all
subsequent silver legislation was repealed. A mild silver hysteria became endemic - a
collecting and hoarding craze swept the country. The demand for silver coins was met by
the 1700 million ounces of silver bullion in the U.S. Treasury. The U.S. mints had to work
overtime to keep up with the demand. From mid-1959 through mid-1964 the Mint had increased
the output of silver coins from 1.6 million pieces to 4.3 million pieces. Silver
certificates could be redeemed only in silver bullion at the historic price of $1. 2929
per ounce. By the Coinage Act of 1965, the half dollar coin was cut from 90 to 40 percent
silver, and all the silver was omitted from the dimes and quarters which were made of
cupro-nickel clad on a copper core. On July 14, 1967 the U.S. Treasury ceased all sales of
silver at the old monetary value of $1. 2929 an ounce. This, plus a 9-month copper strike
produced an explosive situation and silver shot up to $2.565 an ounce in June 1968.
Thus, the demonetization of silver in the U.S., which
began with the elimination of the silver dollar from the coinage in 1873, then the
elimination of silver from the subsidiary coins in 1965, was finally completed on June 24,
1968 when the right to redeem silver certificates was denied. As Roy W. Jastram so aptly
put it in Silver-The Restless Metal (1981): "First the silver went from the coinage;
then the silver backing was removed from the paper . . . We have escaped from clipped,
debased, and manipulated coinage into manipulated, debased and politicized paper - not
much of an exchange. World stability rests on money. Where can discipline be found?"
From the 1968 peak of $2.565 the price of silver declined to
a low of $l .27 in November1971. On December18, 1971 the U.S. dollar was devalued by 7.9%
and on August 10, 1972, the U.S. Government removed the ceiling price on silver. Massive
speculation carried the price of silver up to a high of $6.70 an ounce on February 26,
1974. Profit-taking forced the price down to a low of $3.81 on January 28, 1976. Then
began a rise unparalleled in silver's history, aided by wealthy speculators, who attempted
to "corner" the market. The peak occurred on January 21, 1980 at $48.00 an
ounce. But the collapse was even more drastic; for the price declined to $11.10 on March
28, 1980, when the Federal Reserve Board induced the bankers to grant the Hunt Brothers of
Dallas, Texas a loan of $1 Billion in order to avoid the inevitable bankruptcy of banks
and brokerage houses that had become involved. The New York Stock Market had suffered a
severe decline, which became known as the "Hunt Debacle."
The price rallied and then made a "Double Bottom"
at $10.80 on May 22, 1980, which formed the base for a rally to $24.25 on September 22,
1980, which became the "Head" of a second "Head and Shoulders Top"
(the first one had occurred on Janu-ary 21, 1980). Prices then continued their decline
until June 21, 1982, when a low of $4.885 was recorded. The price then rallied to $10.35
on December 3, 1982.
SILVER PRICE CYCLES
Gertrude Shirk, Editor, "Cycles", the official
organ of the prestigious Foundation for the Study of Cycles, began an in-depth study of
cycles in silver prices from 1850, which were published in Cycles Magazine beginning in
June 1974. She found the following four cycles: 31, 15.36, 9.26 and 5.58 years, of which
the latter was the most important, having repeated 13 times since 1900.
Readers are cautioned that while Shirk correctly
predicted in advance that the ideal peak of the 5.58 year cycle would occur in January
1980, followed by a low in August 1982, the violence of the price movements were solely
the result of massive speculative attempts to "corner" the silver market, with
its inevitable aftermath - collapse.
Based on technical and cycle studies now is the time to
begin accumulating silver.