Coining it in – what you need to know about silver coin prices

Coining it in – what you need to know about silver coin prices

The major thing to bear in mind about silver prices by comparison with gold prices is their relative cheapness. Silver coin prices will always be lower than gold coin prices. Silver is currently trading at a ratio of around 80:1 with gold. This ratio is the gold/silver ratio – and we look at this in more detail below.

One of the biggest reasons for owning precious metals is to store value. Whether gold or silver (or any other metal – platinum, palladium et cetera) your coin can be converted into any currency. The “value” of the currency you exchange for your silver coins or silver bullion fluctuates. This fluctuation is the silver price.

Gold was not always more valuable than silver though.

During the early dynastic period in Egypt, because of the difficulty in mining the ore from which silver was extracted. The main ores,  argentite (Ag2S), chlorargyrite (“horn silver,” AgCl), and galena, were used to extract copper, lead and other base metals. Unless found in nuggets within these ores, silver ais a byproduct of the refining process. This made it rarer than gold, which was found in easier locations.

Silver was first minted as a coin, in its own right, in Lydia, now Turkey. These coins were actually an amalgam of gold and silver – they date to 564 BC – and are known as the Lydian “trite.”

In Greece, between 449 BC and 30 BC, the iconic “Athenia owl” became the first ever mass issue of a silver coin. These owls, made of pure silver, were a common currency, traded daily in commerce, and referenced frequently in literature and other artifacts of the time.

During this period, 305 BC to 283 BC, the Egyptians also used a silver coin called the Tetradrachm. As we already mentioned, they considered these coins more valuable than their gold ones, because the metal was more difficult to recover.

In later centuries, the Romans, between 15 AD and 37 AD, introduced  a coin called the silver Denarius. They circulated this widely across their empire. This Denarius, used frequently in trade and commerce throughout the period, is mentioned, by name, in the New Testament of the Bible.

Historically, the value of silver remained high until the discovery of the Americas by the Spanish conquistadors. Here, stolen and mined gold was found in such huge quantities that silver became usurped as a metal for coins, bars, and jewelry.

Modern times

Until 1789, silver was not recognized as a legal currency in the United States. When the US constitution was drafted, in that year, silver was accepted as a legal means of exchange, and in 1792 The Coinage Act was introduced to standardize the currency. The dollar was defined as a specific weight of silver – this gave it an exact value – in theory.

Unfortunately, when the price of silver exceeded the face value of the coin, which happened towards the start of the 20th century ,many people melted their silver dollars down to make bullion bars to fetch a higher price. This became such a problem that the US government abandoned silver as coinage in 1965.

Silver price charts and gold price charts show the history of these prices in more detail:

You can see quite a correlation between the two metals – although they often get out of sync. As we mentioned above, this relationship is used as a measure of the relative values of the metals, and this is the gold-silver ratio. Simply put, it is the amount of silver bought with 1 ounce of gold.

This chart shows the history of the gold-silver ratio:

By using this ratio it is possible to spot when silver is relatively cheap (at the time of writing the ratio is 85:1 – which makes silver a bargain) It can be bought at a premium, then exchanged for gold when the price rises (or the ratio goes down). The modern-day average for the gold-silver ratio is around 40:1.

This video explains in greater detail than we can cover here, the specifics of trading the gold-silver ratio:

Video – How to trade the gold silver ratio

Who calls the tune?

Silver is traded worldwide through exchanges where the price is determined by COMEX (Commodity Exchange, Inc.) in New York. The price is called the spot price – and changes constantly. It is always quoted in U.S. dollars (USD) and then converted to local currencies. The spot price always refers to the price per 1 troy ounce of .999 fine silver. Silver prices per ounce are standard even in countries that use metric measures of weight.

When they price silver, for example, silver bars, dealers will offer spot or slightly below for the metals. This is known as the dealer premium. When they sell, they will also add a spread to the market price to make a profit. This is why it is never possible to buy silver had exactly the spot price shown.