Gold Prices Limited By Silver To Gold Ratio

      Since the United States has domestic silver there has always been a push from western silver bearing states to use silver as money. In 1792 the silver to gold ratio was set at 15:1 which had been an international standard for 100s of years. Then in 1834 another Coinage Act was passed which changed the silver to gold ratio to 16:1, which resulted in the export of massive quantities of US silver coins to Europe where they could still be traded for gold at a 15:1 ratio. Between 1853 and 1873 US silver and gold miners could take their silver and gold to US Mints and have them turned into US coins, and both bullion and US coins were legal tender. Then the Coinage Act of 1873 demonetized silver bullion, ended the ability of silver miners to have an assured place to sell their silver, and established weights for US silver coins that would last for the next 91 years. Then just 5 years later in 1878 under enormous pressure from the silver producing states Congress agreed to start buying millions of ounces of silver a year for the next nearly 25 years and started minting Morgan silver dollars with it. They also printed silver certificates for every Morgan silver dollar that were held in reserve, and in total around 700 million Morgan silver dollars were produced in the years between 1878 and 1904.

     Between 1873 and 1964 all US 90% silver coins below a dollar totaled 25 grams per face dollar, so a half dollar was 12.5 grams, a quarter was 6.25 grams, and a dime was 2.5 grams, 90% Morgan and later Peace dollars weighed 26.73 grams each so that they contained exactly 24 grams of silver, due to the fixed price of silver being $1.18 per troy ounce when they started minting Morgans they originally contained 92.5 cents worth of silver, plus minting costs and you get a silver dollar, which only really works as long as you keep the price of both silver and gold fixed in some way. The other 10% in 90% silver US coins was copper, which made the coins much more resistant to damage and to wear than pure silver, so 90% silver is also known as coin silver. If you drop a 99.9% silver round or modern government coin on a cement floor the rim will immediately become damaged and all value above melt will be lost, but if you drop a coin made of 90% coin silver on a cement floor it will just bounce and ring like a bell, and then it will be fairly hard to find any damage whatsoever. 

     When the Morgan and Peace dollars were created and silver certificates were created for them, the silver certificates were mostly used only in the eastern United States while in the silver bearing states of the west they preferred using the actual Morgan and Peace silver dollars, and in the early and mid 20th century both Morgan and Peace dollars were commonly used like gambling chips in Reno and Las Vegas.

     We were not the only ones to issue silver certificates, in fact, we ended up melting down about half of all of the Morgan silver dollars we had in 1918 to create about 270 million ounces of silver bullion to sell to the British near the end of WW1. The British needed it so that they could mint it into their own British silver coins to pay off the run on British silver certificates in India. The Germans were encouraging the Indians to turn in their silver certificates for silver coins to break Great Britain financially during WW1. The Pittman Act of 1918 allowed for the melting of the silver, and also for the replacement of most of the coins with bullion purchased again from the silver producing US states of the west.

     Starting in 1921 they recreated nearly all of the lost coins by resurrecting first the Morgan dollar one last time, and then producing Peace dollars from 1922 - 1928. The Peace dollar was itself resurrected one last time after the Great Depression when Roosevelt nationalized the US silver mines in 1934. The price of silver had hit an all time low of around 35 cents an ounce, so the government stepped in, nationalized the mines, and bought up all silver available in the world market, which drove the price of silver up to around 80 cents an ounce. FDR ordered the mints to stockpile the silver and to start making Peace dollars, which were issued once more in 1934 and 1935. Just before this in 1933 FDR had ended the gold standard in the US as a response to European countries doing it first, and when he cornered the market on silver and doubled its price worldwide, he forced China to abandon the silver standard as well, making them the last to do so in the world. Finally in 1939 as a response to the great depression FDR set the silver to gold ratio at 35:1, which would only last 5 years, then in 1944 it was restored to 15:1.

     In 1963 Presidential Executive Order 11110 was signed by Kennedy. He gave a speech to explain the order in which he laid out his vision for the future of US money. He stressed that silver had become a largely industrial product, and while as a Silverite he still wanted US coins to be made of US silver, he also said that the US should have money printed by the US federal government, not by the private company called the Federal Reserve, and not backed by gold. He said that the money should ultimately be backed by nothing more than faith in the United States government. Five months after Executive Order 11110 John F Kennedy was assassinated, and just 2 months later starting in November of 1963 the Federal Reserve emblazoned his effigy on the half dollar coin and began minting more than a decade's worth of silver half dollars, quarters, and dimes stamped 1964.

     Then in 1965 the US government declared that they had run out of silver, that they were going to mint base metal coins instead, that minting 90% silver dollars was now illegal, and that silver certificates would need to be cashed in within the next few years. All silver certificates needed to be redeemed by 1968, then they sold off all of the remaining silver dollars held in the US Treasury starting in the early 1970s. They continued to mint Kennedy's effigy on 40% silver half dollars from 1965 until 1970, and again in 1975 and 1976 at the San Francisco mint for the bicentennial with the dual dates of 1776 - 1976. The final silver coins of the era were 40% Eisenhower silver dollars produced in San Francisco from 1971 - 1974 and then again in 1975 and 1976 as the dual date bicentennial coins, along with the 40% Kennedy halves and also some 40% silver quarters.

     The US government did retain both gold and silver bullion reserves, with the US having over 105 million troy ounces or 3,265 metric tons of silver bullion, and 261 million troy ounces or 8,133 metric tons of gold bullion in the Strategic National Reserve. The total for the amount of silver turned into 90%, 40%, and 35% (war nickel) coins over 100 years was over 2 billion ounces or 57,000 metric tons of silver, which largely still sits in hoards all over America, even though some has been melted over time, 2 billion ounces is a lot to start with, and so there are still enormous stockpiles of hoarded junk silver coins, also known as constitutional silver, coin silver, and 90% silver. In addition to that, Americans continue to buy over 64,000 troy ounces or 2,000 metric tons of silver per year as investments, mostly in the form of silver bars. The mines in the western states established their own private mints like the Scottsdale Mint in Arizona and the Sunshine Mint in Idaho, and have been selling privately minted silver bars and rounds like the Buffalo Silver Round for less of a premium markup than government minted coins.

     FDR had officially taken the United States off the gold standard in 1933, and by 1971 Nixon ended any ties of US currency to gold, and so did China, so now our money is called fiat money meaning money backed by nothing, not by gold or by silver, and all money on the planet is also now fiat money. However, BRICS (Brazil, Russia, India, China, and South Africa) created an economic partnership that has expanded to include other countries now, and Russia claims that they will be creating some kind of a gold-backed currency again 50 years after the last international gold-backed monetary system fell apart.

     In April of 2024 Zimbabwe launched their 6th currency in 15 years with the last 5 failing due to out of control black market inflation caused by street vendors in open air markets not trusting it and preferring the US dollar instead. This time was different, the new Zimbabwe ZiG was going to be the first currency in the world in 50 years to be backed by gold, and it seems to have worked, traded by the government banks at 13.6 per 1 US dollar continuously since April, the black market immediately traded it at launch for 20:1 to 26:1 and the inflation continued on the streets for the next few months reaching over 100:1, so the government printed million more dollars worth of notes, all backed by repository gold, and injected them into the economy still at 13.6 to 1. So eventually the inflation fell, the street markets of Zimbabwe experienced deflation for the first time in 15 years this month and the exchange rate on the black market fell all the way back to where it started at 20:1 to 26:1. The Sahel States Association or AES of Burkina Faso, Niger, and Mali kicked out all foreigners and nationalized their gold mines, built their own refineries and refined their own gold ore. They are also saying that they will issue Sahel Association money backed by their gold reserves.

     Recently gold broke new records, trading over $2,640 USD per ounce, and silver matched pace at over $31 an ounce because silver is still tied to gold in a perceived silver to gold ratio that is now around 85:1, but Kitco predicted $10,000 an ounce gold, which could happen, because we save and recycle almost all industrial gold, and most gold is used as a form of investment or jewelry. But like Kennedy said, silver has become a mostly industrial product, in fact of the 6 metric tons of silver consumed by America per year, 2 tons go to stackers, 2 tons go to industry, and 2 tons go to basically wiring and circuit boards in disposable consumer goods. Since we don't recycle any of the silver used in disposable electronics we also throw out 2 tons of silver a year in landfills. The only thing holding gold back is silver, for gold to go to $10,000 and for silver to maintain an 85:1 ratio, silver would have to cost $117 an ounce. Because silver is mostly used in industry, that should keep the price of silver from going up four times, which may require that the silver to gold ratio be abandoned entirely for gold to be able to go to $10,000 an ounce.