Silver Hasn’t Been This Cheap in 5,000 Years

We have financial records dating back some 5,000 years and in all that time, silver has never been this cheap compared to gold.

Kanesh was an important trading hub in the Assyrian empire. The city was located in the middle of what is now Turkey, at the midpoint of the route between the Mediterranean and the Black Sea. 

Archeologists have found thousands of clay cuneiform tablets in the region that provide a tremendous amount of detail about ancient financial transactions. For instance, one tablet on display in the New York Metropolitan Museum documents the terms of a loan dating back to the 19th century BC. An Assyrian merchant named Ashur-idi loaned 3kg of silver to two traders, with 1/3 of the amount to be repaid in one year’s time. 

Other tablets give us a pretty good idea of exchange rates. A Babylonian tablet reveals that that 5 shekels of silver were worth ½ shekel of gold. This implies roughly a 10:1 ratio between silver and gold.

This ratio makes sense. Geologists estimate that there are approximately 19 ounces of silver for every ounce of gold in the earth’s crust, with a ratio of approximately 11.2 ounces of silver to each ounce of gold that has ever been mined. Of course, the actual ratio will fluctuate over time with given conditions. Interestingly, the silver-gold ratio in ancient Egypt was 1:1.

In 1792, the gold/silver price ratio was fixed by law in the United States at 15:1. France mandated a ratio of 15.5:1 in 1803. Faced with the challenges of a bi-metallic monetary system with fixed exchange rates and the aftermath of a worldwide financial crisis, the US Congress passed the Coinage Act of 1873. Following the lead of other Western nations, including England, Portugal, Canada, and Germany, this act formally demonetized silver and established a gold standard for the United States.

As Sovereign Man founder Simon Black pointed out in a recent email, up until the 20th century, the silver-gold ratio remained within that ancient range of between 10 to 20 units of silver per unit of gold. As gold and silver’s role as a medium of exchange diminished, the spread widened, averaging around 40 to 5o-1. 

Today, that ratio is over 113 to 1.

That’s way out of whack.

In fact, this silver-gold ratio hit an all-time high of 120-1 back in March. In other words, silver has never been this cheap in some 5,000 years of human history.

It was just a year ago that we were talking about “silver on sale” when the gold-silver ratio pushed above 80-1.

Black summed it up this way.

If history is any guide, this means that the ratio should eventually narrow, i.e. the price of silver should rise and/or the price of gold should fall, bringing the ratio back to its more normal range.”

Given the inflationary monetary policy from the Federal Reserve, Peter Schiff has said that the dollar is cooked and that we will see a rush to gold. Black agrees, writing, “One thing that has become clear is that western governments will print as much money as it takes to bail everyone out.”

So, it seems unlikely that the price of gold will fall in order to close the gap. In fact, historically, silver tracks roughly with gold and has outperformed the yellow metal in a gold bull market.

Now is the time to take advantage of silver on sale. Talk to a SchiffGold precious metals specialist today to learn how you can profit from this historically high silver-gold ratio. After all, 5,000-year opportunities don’t come around every day. Call 1-888-GOLD-160 or email [email protected].