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A Brief 2,000-Year History of Silver Prices

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For most of history, somewhere between 1/10th and 1/15th of an ounce of silver would buy a day's labor, but today's wages are not nearly as standardized.

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So what would those wages buy? In the early 14th century, wine cost between 3 pence and 10 pence per gallon in England, and two dozen eggs could be had for 1 pent. Some time later, an axe cost about 5 pence in mid-15th century England, while wheat cost about 0.2 g of silver per liter (not much different than the per-liter price in ancient Greece).

The Industrial Age

By the 18th and 19th centuries, the use of paper money was increasingly common alongside silver and gold coins. What's more, the price of gold and silver were increasingly fixed and stable for long stretches of time. Sir Isaac Newton fixed the price of gold in 1717, and it pretty much stayed at that at the price (excluding the years of the Napoleonic Wars) until World War I.

Likewise, the price of silver more or less stayed at about $1.30/oz from the founding of the US through the Civil War. Prices were exceptionally turbulent during the Civil War (rising to nearly $3/oz) and stayed above $1.30/oz until the late 1870s. Prices generally declined through the latter years of the 19th century, dipping below $0.60/oz in 1897, and mostly hovered in the $0.50s through to World War I. From a low of about $0.25/oz in 1932, silver generally climbed thereafter – moving above $0.70/oz after World War II, moving past $0.80/oz in 1950, and crossing $1/oz in 1960.

Silver jumped alongside gold throughout the 1970s, and spiked to $50 per ounce in January 1980 as the Hunt brothers (Nelson Hunt and William Hunt) manipulated silver in an attempt to corner the market. Silver crashed shortly thereafter, hitting $8 in 1981, $6 in 1986, and dropping below $4 in the early 1990s. Silver has since rallied through the late '90s and the first decade of the 21st century, and currently sits around $33 an ounce.

Tracing the path of wages, we have an average wage of about $1 per day in the latter part of the 19th century, or about 25 g of silver. When Henry Ford revolutionized the auto industry (and how companies viewed wages) in 1914 and offered $5/day (about 10oz of silver), the average daily wage was about $2.34 per day.

When federal minimum wages began in 1938, the nominal value of those wages were about $2/day (or more than 4.5 ounces). Those wages climbed to about $16 per day in 1974 (about 3.6 ounces of silver) to $58 today (or about 1.75 ounces of silver). Said differently, today's minimum wage buys about 13 times the amount of silver that the average daily wage in ancient Greece bought.

The Future

Silver's value throughout history has always been volatile, as the supply of labor, foodstuffs, and consumer goods waxed and waned with wars, trade growth, and technological innovation. Given how modern governments view monetary policy as something of a panacea, though, it seems like ongoing inflation is a pretty safe bet.

It is worth asking whether the price of silver stacks up as fair. For more than 2,000 years, somewhere between 1/10th and 1/15th of an ounce of silver would buy you a day's labor; in today's terms, that would suggest that silver should trade for $264, if US wages should be seen as the global standard. By way of comparison, minimum wages in China's Guangdong province (an area with extensive manufacturing activity) would work out to about $6/day on average or about 5.6 g of silver – about half the wages in fourth century Greece, so it really is a case of what you consider to be the representative global wage.

It is also interesting to see that the value of gold today is more than 50 times that of silver, even though the actual ratio of production and global reserves suggests that such a spread is at least three times wider than it should be. In any event, investors should continue to expect silver prices to be volatile and inconsistent, irrespective of whether governments start pursuing sounder monetary policy.

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Editor's note: This article by was originally published on Commodity HQ.
No positions in stocks mentioned.
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