Silver, like gold, is the world’s choice for a liquid alternative to store one’s wealth as opposed to fiat currency. After World War II under the Brenton Woods agreement, the United States assumed the role of mediator of sovereign currency values (i.e., exchange rates) promising that the dollar was redeemable in a fixed quantity of gold.
All was status quo… for a while.
In the 1960s, the temptation to fund a more socialistic agenda and anti-communist warfare with federal reserve notes rather than politically unfavorable taxation was too great. By the mid-1960s, it was becoming evident that the value of the dollar was in serious decline. One visible alarming signal was the government’s termination of silver coinage in 1965, as debased dollars caused widespread commodity price inflation. The monetary metals, gold and silver, were headed to the free market.
During this period, freethinkers across the globe sought protection from wealth debasement and became keenly motivated to diversify into precious metals. At that time, Americans were still subject to the Gold Confiscation Act of 1933, which made owning gold illegal under the political claim that it was evil hoarding. Americans relied on silver as a politically correct and perfectly legal solution.
In 1970s America, silver investments mainly consisted of 1000 oz .999 fine silver bullion bars and bags of silver coinage, a product for which Monex was the leading market maker. Both these silver commodities held significant importance, having futures contracts on the New York commodity exchange. Intellectuals, newsletter writers, and authors shared economic indices like money supply growth and fiscal spending, highlighting the benefits of owning tangible precious metals to anyone who would listen. This was the age of precious metal enlightenment in America. Most impactful were authors Jerome Smith and Presidential candidate Harry Brown, who authored the 1970 book; How You Can Profit From The Coming Devaluation.
Investors with significant wealth were unable to satisfy their diversification needs with just coinage, so the 1000 oz bullion bar became the answer for wealthy Americans. The most noted investor was Texas oil tycoon Bunker Hunt. Like many others, Hunt recognized The Great Inflation while it unfolded and planned ahead. Contrary to popular belief, the Hunts did not cause the phenomenal increase in silver prices. Read more on the insider’s view of the Hunt story.
Simply put, wary investors needed precious metals. With gold ownership dubbed as ‘illegal’ in America and silver undervalued relative to its historic 16:1 ratio to gold, freethinkers sought to invest in silver in a meaningful and impactful way. They were true believers in silver – And the demand for 1000 oz silver bullion soared.
What was the cause of The Great Inflation? If you have read somewhere that higher oil prices caused inflation in the 70s, you may want to pay close attention. The oil price theory essentially means that higher prices are the cause of higher prices. Don’t be fooled by circular logic. The Great Inflation was actually the result of the great currency growth in the 1960s and 1970s. Both the money stock (supply) and bank liquidity (credit) grew substantially, while the longstanding gold-backed dollar failed and became a fiat currency.
The 1970s Great Inflation started with the Great Monetary Growth in early 1961. Money Stock, as seen as readily available supply, is reported by the Federal Reserve as M1 money supply. M1 was stable from mid-1959 to January 1961, when it started to surge as did cash liquidity and credit. See the M1 and Velocity historical charts below.
To sum it up, higher prices are always based on the law of supply and demand. In the long term, the supply of money stock and money liquidity enhance potential demand in terms of a monetary unit as shown by classical economics and proven throughout history.
Will silver reach the $50 range for the 3rd time? It seems fair to say seeing silver in the $50 range is likely based on relative economic figures, let alone the bullish projections of its sibling, gold.
Could silver reach $100 per ounce? It is a reach to say $100 silver will happen in the near future. However, the answer rests largely on the measure it is weighed by the dollar. If you take into account the dollar’s track record and consider that against the backdrop of silver’s indispensable industrial utility and upside potential, it is futile to argue that $100 silver won’t happen in our lifetime.
For your convenience, a Monex bullion specialist is available to answer all your questions about the precious metals investing process and share the latest commentary on the silver market as it relates to investment-grade products. Contact a Monex account representative today and learn more about the significant advantages of buying and selling 1000 oz silver bars.
With billions of dollars in transaction volume, a two-way buy/sell market and consistently competitive precious metals prices, Monex remains a preferred source for physical silver investments.
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The Predecessors to the American Silver Eagle The Mexican Libertad, introduced in 1982 and minted every year since its inception, holds the title of the first contemporary .999 fine silver bullion coin. Adorned with national symbols and the Angel of Independence, this coin features a rich and meaningful design. In contrast, the earlier Onza, which more…
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