Willoughby: The ups and mostly downs of the price of silver

I found an interesting historical analysis of the global price of silver and gold from 1850 to 1890 in one of a pile of Engineering and Mining Journals that fill up a shelf in my closet. It expanded my understanding of the price of silver that had mostly focused on what happened after 1880.

In the 1891 piece by R.P. Rothwell, the author went into detail comparing the two rare minerals to each other and to commodities, like food and materials. Recently, gold has been selling for around $2,000 an ounce, and silver fluctuating between $23 and $30. All the values I present will be in today’s dollars for a good comparison.

From 1855 to 1873, silver did not fluctuate much, holding steady at around $38 an ounce. Gold and silver had both an industrial use and value as well as the value ascribed to them for use in coinage and for backing other currency uses. The ratio between the value of gold compared to silver held during most of this time, too: around 16 ounces of silver to one ounce of gold.

1873 was the seminal year for changes to the value of silver. Holland, France, Belgium, Italy, Switzerland, and Greece, which coined silver, ceased minting silver coins. The United States, that had been minting silver dollars, joined those countries and went on the gold standard. In America, it became known as the Crime of ’73.

The price of silver dropped precipitously between 1873 and 1879, averaging around $28.60. In 1880, it dropped another dollar. The amount coined internationally dropped 50% in two years.

However, even though the price continued to drop a little each year, going down to $24.73 in 1889, the production of silver increased for every one of those years from $2.5 billion to over $4 billion. The total gold production, in dollars, fluctuated more from one year to the next, both up and down, but remained less than that of silver.

The author was attempting to explain the changes in silver and gold prices and compared them to other commodities. Since silver was just a commodity after 1879, it made sense and the results were as would be expected. Food, material, sugar, coffee, tea, and textiles that held their values through 1870 began dropping, quickly from 1870 to 1873, but then a nearly continuous drop through 1889.

Dealing with economic tensions in the United States, we went back to using silver with the passage of the Sherman Silver Purchase Act in 1890 that required the Treasury to buy 4.5 million ounces of silver a month. That raised the price to $27.60 immediately, and it reached its highest of $34.32 soon after but then began dropping again.

In 1893, India, the largest purchaser of silver, stopped mining silver. The price dropped from $19.28 to $15.12 in three weeks. The U.S. and world economy, for other reasons, went into the Panic of 1893.

The price remained in that $15 to $20 range for the next few decades, but with a surge during World War I. Aspen survived by increasing production levels, mining higher amounts of lead and zinc, and improving milling.

The last drop was during the Depression, when it tanked at $4.16 an ounce. President Roosevelt, to break away from the gold standard crippling economic recovery, raised it to $12.30 in 1933, keeping Aspen’s mining alive through 1950. By then, the price of silver wasn’t the problem. It was the competition of international silver production paying much lower wages.

Tim Willoughby’s family story parallels Aspen’s. He began sharing folklore while teaching at Aspen Country Day School and Colorado Mountain College. Now a tourist in his native town, he views it with historical perspective. Reach him at redmtn2@comcast.net.