Over The Hedge, All About Gold and Silver

Way back during the ancient to medieval period, many civilizations used gold and silver as money for centuries with local stability. Monetary systems were often based on the weights of precious metals with these values experiencing some regional variation. In societies such as Egypt and Persia, these metals served as mediums of exchange, with formal coinage emerging around 600 BC.

The Roman Empire famously maintained a gold to silver (GSR) ratio of approximately 12:1, a ratio that remained remarkably consistent across many cultures and centuries. It began to deteriorate notably during the Roman Empire, especially starting in the 1st century AD. A key turning point was under Emperor Nero in 64 AD when the silver content of the Roman denarius coin was reduced (or debased) by about 20% to cover increased military and public expenditures when the Great Fire of Rome triggered large reconstruction costs requiring significant funding. Since Rome did not have a system of borrowing or government debt like modern states, Nero’s administration chose to debase the silver content of coins to stretch the available money supply. 

Debasement allowed more coins to be minted from the same amount of silver which started the economic difficulties associated with the decline of the Western Roman Empire. Nero lowered the silver content from about 3.9 grams to 3.4 grams and added cheaper metals like copper to make up the difference, ensuring the coin remained the same size and appearance. This is the first ever example of a government spending with tax payers money and running a deficit. For the public, this worked like an indirect tax via inflation: though the coins had the same legal value, their actual silver content was less, so people needed more coins to buy the same goods and services. Over time, this reduced purchasing power and caused inflation as prices rose to compensate for the devalued currency. It was a hidden way for the government to fund deficits without raising explicit taxes immediately, but with the long-term effect of eroding trust in the currency.

More coins were being minted from a given amount of silver, effectively increasing the money supply without additional silver reserves. To cover increased spending, Nero also raised taxes heavily on the provinces. While Nero's spending was partly financed by these taxes, the debasement of currency was a blunt tool to cover the gap between expenditures and revenue.

Over the next few centuries, successive emperors continued to debase the silver denarius significantly, resulting in coins with much lower silver content and value. By the 3rd century AD, the denarius had become virtually worthless as its silver content dropped drastically, leading to inflation and economic instability. Attempts at monetary reform by emperors such as Aurelian and Diocletian temporarily slowed the decline but did not fully restore stability. This debasement and instability in Roman coinage is often marked as the end of the long era of relatively stable ancient precious metal currency systems. 

Following the Roman period and the early Middle Ages, Europe experienced economic decentralization and less standardized coinage, leading to various regional monetary practices. By the early modern period of the 16th-17th centuries, issues like coin clipping (shaving the edges with knives to extract tiny shards of value), inconsistent purity, and fluctuating metal values confronted European states.

One notable figure in stabilizing currency was Isaac Newton, who while known for mathematics, was also Master of the Mint in 1717. He fixed the GSR exchange rate at 1 gold coin = 21 silver shillings. His reforms improved coin quality, prosecuted counterfeiters, and standardized assays. His efforts helped save the British coinage system from collapse during a time when up to 20% of coins in circulation were counterfeit. Though Newton intended to create a stable bimetallic system with gold and silver, this ratio overvalued gold and undervalued silver compared to international markets where silver was more valued relative to gold, especially in countries like Spain, Portugal, China, and India. As a result, market forces caused silver to leave the British economy, and Britain adopted a gold standard unintentionally, marking an important turning point in modern monetary history. 

In the United States, the Coinage Act of 1792 established a bimetallic standard, defining the dollar in terms of fixed amounts of gold and silver. Silver was effectively removed from the standard by the Coinage Act of 1873 and the Resumption Act of 1875, culminating in the Gold Standard Act of 1900, which made gold the sole monetary base. This Act fixed the US dollar's value to a specific weight of gold (~25.8 grams of 90% gold), fixing the gold price at about $20.67 per troy ounce.

The fixed gold price of around $20.67 per ounce remained until the Gold Reserve Act of 1934 raised it to $35 per ounce to expand the money supply during the Great Depression. If the country had a trade deficit (importing more than exporting), gold flowed out to pay for those imports, reducing the country's gold reserves. Since money supply was tied to gold reserves, this outflow forced the country to reduce the amount of money circulating in the economy. With less money in circulation, people and businesses had less access to cash, causing spending to drop, which led to economic contraction—businesses sold less, produced less, and often laid off workers. This fall in spending and money supply also caused prices to fall, a phenomenon known as deflation. Deflation hurt economies because falling prices encouraged people to delay purchases, expecting prices to drop further, which further reduced demand, slowing economic growth even more. The gold standard prevented governments from printing more money to counteract this slump since they had to maintain gold backing. This inflexibility worsened the Great Depression by forcing countries to reduce money supply and allow deflation and contraction to continue.

Countries solved the economic problems caused by the gold standard during the Great Depression by abandoning it. Leaving the gold standard let governments stop backing money strictly with gold, so they could print more money freely. This allowed central banks to lower interest rates drastically, making it cheaper for businesses and people to borrow and spend. With more money circulating, economies could expand instead of shrink, reversing deflation (falling prices) by raising prices and wages. For example, after the U.S. left the gold standard, it grew rapidly because the Federal Reserve and Treasury increased the money supply and inflation expectations encouraged spending and investment. This monetary expansion helped end deflation, increased economic output, and started recovery from the Depression. Countries that stayed on the gold standard longer suffered slower recoveries because they couldn't use these tools. Eventually, by the mid-1930s, nearly all countries had abandoned the gold standard, marking the end of the era and beginning of modern monetary policy based on fiat money.

When the U.S. left the gold standard in 1933 during the Great Depression, it took several specific policy steps to manage the transition and restore economic stability. President Franklin D. Roosevelt made it illegal for U.S. citizens to hold most gold coins, gold bullion, and gold certificates. Citizens had to sell their gold to the government at a fixed price of $20.67 per ounce. This move aimed to eliminate hoarding and increase government control over the gold supply. Then the U.S. government took control of all gold held by the Federal Reserve and increased the official price of gold from $20.67 to $35 per ounce, effectively devaluing the dollar because it took more dollars to buy gold. This higher price increased the monetary base and allowed the Federal Reserve to expand the money supply, combating deflation. People that illegally held their gold saw their value appreciate overnight. 

In 1944 post WWII, all other countries pegged their currencies to the U.S. dollar at fixed exchange rates. This $35 per ounce rate stayed fixed during the Bretton Woods era starting in 1944, making the dollar the central reserve currency backed by gold. Global currencies were now being pegged to the dollar, indirectly pegging them to gold. Because the dollar was the only currency convertible directly to gold by foreign governments at this fixed rate, it was effectively "as good as gold" in international finance. This system provided stability and predictability for international trade and finance after the chaos of the interwar years. The system lasted until 1971 when the U.S. ended dollar convertibility to gold, fully abandoning the gold standard and moving to fiat currency

By the late 1960s and early 1970s, the U.S. faced growing inflation, trade deficits, and gold reserve depletion as foreign countries exchanged dollars for gold, threatening the ability to maintain dollar-gold convertibility and the entire system's stability. They were printing more money than they had gold to back which caused a “dollar overhang”: there were more dollars circulating internationally than the gold reserves the U.S. held. The Nixon Shock was a decision that took the dollar off the gold standard preventing a U.S. default on obligations to exchange dollars for gold, preserving remaining gold reserves and ending dollar-gold backing. The immediate consequence was that the dollar ceased to be convertible to gold, turning it into a fiat currency without gold backing. Gold prices then began to float freely in the free market rather than being fixed at $35 per ounce.

Once the dollar was no longer convertible to gold, those pegs collapsed. Currencies began to float and were priced by the market (i.e. supply and demand, interest rates, trade balances, inflation, and economic strength). The US dollar included, since it wasn’t backed by gold anymore, its value was also determined by market forces.

Turning to focus more on silver's timeline, going back to Ancient Rome, the gold-to-silver ratio was approximately 12:1, meaning 12 ounces of silver were considered equal to 1 ounce of gold. This ratio was set based on metal availability, monetary policy, and the economic conditions of the time. Over time, as different civilizations and governments experimented with monetary systems, the ratio fluctuated generally between 8:1 and 15:1 depending on silver supply, mining discoveries, and coinage standards. By the 18th century, Western nations including the U.S. formally set the ratio near 15:1 for silver and gold (e.g., the U.S. Coinage Act of 1792 set 15:1). 

In the U.S., silver was legal tender and monetized alongside gold until the late 19th and early 20th centuries. The Coinage Act of 1873 stopped free coinage of silver, starting its "demonetization" process. The Act stopped silver holders from having their silver bullion minted into silver dollars as legal tender, slowly pushing the people towards a gold standard. Without official free coinage backing, silver prices were no longer stabilized by monetary demand and became subject to open market supply and demand dynamics like any other industrial commodity. As silver mining surged, supply exceeded demand from coinage, causing silver prices to drop.

The two effects caused drastic silver price plunges because silver supply kept booming and coinage demand was completely removed. Farmers and miners got mad since they wanted silver to keep being converted to coins as currency to increase money supply, which would increase inflation, which increases their prices so they make more in profits, but this never happened as the gold standard became the norm. As a result they criticized it as the Crime of '73. Despite the backlash, this move was influenced by factors including large new silver discoveries, the relative value of silver to gold, and desire to stabilize the monetary system on gold rather than bimetallic standards.

A smaller money supply causes deflation, where the purchasing power of money increases but prices of goods and services fall. So farmers and debtors were especially hurt by deflation because while prices for their crops fell, their debts remained fixed, meaning they needed to pay back loans with more valuable dollars. The main conflict was between the gold standard supporters (who wanted money backed only by gold for stability) and the silver advocates or "free silver movement" who wanted to restore silver coinage to expand money supply and cause inflation.

This monetary debate dominated U.S. politics through the late 1800s for decades until the Gold Standard Act of 1900 formally adopted gold as the sole standard. Through the Early 20th Century silver coins remained legal tender for a while, but they were no longer backed by the actual silver metal value inside them. Instead, their value was based on face value (i.e. the amount printed or stamped on the coin or certificate). Silver's demonetization was a gradual process lasting decades as alternatives to silver coinage took hold and silver shifted toward industrial and investment roles rather than money.

The U.S. began to buy massive amounts of silver in 1934 under the Silver Purchase Act because for years the price of silver was tanking and needed support to help miners and silver producing states survive. However, this was underscored by Roosevelt looking for fresh political backing during the New Deal Era. His justification was that silver was bought back from the public as a monetary hedge, and seen as a backup reserve asset amid global monetary chaos since the possibility of bimetallic revival wasn’t completely off the table just yet in people’s minds. They said it was to diversify from gold only dependence, aka the gold standard that was newly instated at the time. This worked to bring silver prices higher because the government became a guaranteed buyer at above market prices. Miners could sell unlimited silver to the Treasury. This removed market risk and ensured profitability. The treasury bought huge volumes, reducing global supply. Silver became scarcer in the open market. Demand was larger than supply at this point so the price essentially reversed and drastically increased. The government built large silver reserves and renewed silver coinage as part of the remedy for the Crime of ‘73, and also to stabilize the economy and ease monetary conditions. They used all the silver they bought to mint new coins for circulation at face value.  

Over time, increasing industrial demand and rising silver prices made silver coin production expensive and the price of silver exceeded the face value of minted coins. Eventually, countries gradually had to reduce silver content in coins. For example, Canadian dollars, U.S. quarters and dimes contained 90% silver until 1964, then changed to copper-nickel alloys by the next year under the Coinage Act of 1965. This shift from silver to base metals for coins marked a practical end to silver as circulating monetary metal. Remember, the Bretton Woods system (post-WWII) tethered currencies to the U.S. dollar itself convertible to gold, which maintained a gold-based international system but without silver. Silver ceased its historic role as a monetary metal and transitioned primarily into an industrial metal and investment commodity and by 1971, the U.S. fully abandoned metal-backed currency, marking the end of silver as money.

Today, no country uses a silver standard or silver-backed currency. Silver coins remain as special bullion or collector coins but no longer as everyday currency backed by their metal. Silvers purpose was now tied to Photography, electronics, mirrors, batteries, chemicals and other emerging industrial uses 

Now that we have covered the history, it’s time to evaluate the ratio between gold and silver prices and how money can always be made. If the market value of one metal diverged significantly from the official government ratio, people would hoard the undervalued metal and spend the overvalued one. This is a classic example of Gresham's Law, which states that "bad money drives out good money”. Investors have used a "mean-reversion" strategy, which assumes the ratio will eventually return to its historical average. The gold-to-silver ratio illustrates the relative value between gold and silver and has historical roots reaching back over 5000 years. Ancient ratios were low (e.g., 2.5:1 in Egypt), rising in Roman times to approximately 12:1.

The U.S. Coinage Act of 1792 fixed the ratio at 15:1. Silver discoveries in the Americas led to surpluses, pushing ratios to around 16:1. Transition to the gold standard in the 19th century drove the ratio up, reaching about 30:1 by century's end as gold dominated. When Roosevelt changed the official gold price in 1934 from $20.67 to $35 an ounce, it devalued the dollar and made gold more expensive in dollar terms, meaning you needed more silver and dollars to buy one ounce of gold, even though buying silver increased its price historically high,  because silver’s price did not increase enough proportionally, the gold-silver ratio rose to about 72:1 meaning one ounce of gold was now worth 72 ounces of silver. The GSR reached a high of around 100:1 around 1940. In the 1960s when silver coinage was being removed, rising silver prices due to industrial demand caused the ratio to change to around 35–40:1. Only when the US left the gold standard in 1971 silver and gold became fully free and the gold-silver ratio became highly volatile as prices adjusted to supply, demand, inflation, and investor sentiment in an unfixed market.

Gold prices surged dramatically, rising from the fixed $35/oz to over $180/oz by 1974 and peaking above $660/oz in 1980, while silver also experienced significant price volatility and spikes. Gold diverged much more from silver after 1971 largely because gold became primarily a financial asset and a safe haven during economic uncertainty, inflation, and geopolitical tensions, leading to stronger investment demand compared to silver. Central banks accumulated gold aggressively as a reserve asset, boosting gold demand and prices, whereas silver lost its monetary status and did not benefit from such institutional buying. Silver has significant industrial demand (about 55% of its usage), making its price more tied to economic cycles and industrial growth, leading to relatively weaker price performance in times of uncertainty compared to gold. Gold markets have more liquidity, ETF support, and investor participation than silver, which is subject to price suppression and paper market manipulation. Another reason gold is priced significantly higher than silver is psychological factors amplify gold’s appeal as a currency hedge and store of value, especially when fiat currencies weaken.

There was a time when silver did see an unprecedented spike. Known as The Hunt Brothers' Silver Spike which occurred In the late 1970s, the ratio saw a massive drop to an all-time modern low. The Hunt brothers attempted to corner the silver market, driving the price of silver to nearly $50 an ounce. This caused the ratio to temporarily plummet to around 17:1 in 1980. After their attempt failed, silver's price collapsed, and the ratio quickly returned to a much higher level. The Hunt Brothers began by purchasing large quantities of silver bullion and coins, using their substantial inherited wealth and borrowing heavily to finance their purchases. Their strategy was to create artificial scarcity by warehousing silver in storage facilities and Swiss bank vaults, effectively removing it from the market and driving prices upward. They also used silver futures contracts, opting to take physical delivery of silver rather than cash settlement, which further reduced the available supply on the open market. By late 1979, the Hunt brothers and their investors had amassed about 100 to 200 million ounces of silver, roughly one-third of the world's tradable supply. This aggressive accumulation caused silver prices to skyrocket from around $6 per ounce in early 1979 to a peak of about $50 per ounce in January 1980.

Their downfall came when "Silver Rule 7" imposed by the Commodity Exchange (COMEX) on January 7, 1980, sharply restricted the purchase of silver futures contracts on margin. This sudden removal of leverage forced the Hunts to either come up with massive amounts of cash instantly or to liquidate silver holdings. Shorts poured in and people started selling silver in fear. Eventually liquidity constraints culminated in "Silver Thursday," when the Hunts defaulted on margin calls, causing a sharp price plunge and public financial disaster. On Thursday, March 27, 1980, silver dropped from approximately $21 earlier in the day to below $11 by the afternoon, losing more than 50% in just hours.

The supply and demand including mining production and industrial demand for silver have influence over price action. Countries that produce a lot of gold like Australia, China and Russia experience fluctuations in their output. For silver, mine supply accounts for about 80-85% of total silver supply, which is heavily influenced by production levels in countries such as Mexico, China, and Peru. Lower mining costs can increase supply while rising extraction costs diminish profitability, leading to lower supply if mines cut back or suspend operations. Examples of costs are due to energy prices, environmental regulations, and resource scarcity. For mines operating in foreign currencies, weaker local currency can increase costs if not offset by higher demand and trade deals with foreign countries with stronger currency.

Jewelry remains a substantial demand source for both metals, further influencing prices when consumer preferences shift or economic conditions change. When recycling activity increases, like selling or melting jewelry and bullion bars it boosts secondary supply which can offset declines in primary mine output and act as a stabilizer. Both gold and silver serve as stores of value, especially during times of economic uncertainty, geopolitical tensions, or inflationary periods, which increases investment demand and pushes prices higher. As industrial activity in electronics, solar energy, and electric vehicles expands, demand for silver would grow, supporting higher prices. 

Throughout history recessions, hyperinflation, currency devaluations, and geopolitical instability often elevate the demand for gold and silver as safe-haven assets, like during the 2008 financial crisis. Mining strikes in key producing regions, or new regulations can reduce supply, driving prices higher like during South Africa's apartheid-era mining strikes. Geopolitical instability and oil shocks pushed gold as a safe haven like during the 1979–1980 Iran Revolution & Oil Crisis or the 1990 Gulf War and the 2001–2003 9/11 attacks & Afghanistan War. During the European Debt Crisis in 2010–2012 debt fears increased gold purchases. More recently, COVID-19 pandemic (2020) saw massive stimulus, market uncertainty, and a weak USD driving gold to ~$2,070/oz. Even natural disasters can cause a spike. Global markets are affected by central banks holding gold reserves which often influence prices through monetary policies and putting economic stability at stake. Stability or instability in these metals' prices reflects confidence in money and financial systems

Other than being a hedge, strong bull markets in equity and other asset classes can coincide with growing investor interest in precious metals as portfolio diversifiers and alternative investments, causing price gains. This sometimes happens alongside a gold-silver ratio contraction where silver rises relatively faster than gold. In times of economic expansion, increased demand for fabrication and industrial uses can outpace mine production and recycling capacities, creating deficits and pushing prices higher. Silver's dual role as an industrial metal and monetary asset means industrial demand strongly affects its price. Fluctuating silver prices affect costs in industries reliant on silver, potentially influencing pricing and innovation. In the 1960s and 70s, silver prices surged due to industrial demand growth and government withdrawal from silver coinage, before the speculative Hunt Brothers' cornering. 

Lower yields reduce the opportunity cost of holding gold which can lead to more inflows. Gold does not pay interest or dividends, so when yields on interest-bearing assets like bonds and savings accounts are low, holding gold becomes comparatively more attractive. For example, in 2019–2020 gold rose despite no major immediate crisis because rates were low.

Other times these commodities have risen without acting as hedge was in the early 2000s tech bubble recovery. Some notable gold inflows occurred as portfolio diversification increased to spread out risk. Rising incomes in big markets like India and China have shown higher jewelry demand causing some price support

Specific technological booms in the 21st century, especially related to green energy, have also lifted silver prices due to demand for photovoltaic cells. Silver is essential in photovoltaic (PV) solar panels due to its excellent electrical conductivity. It’s used as a conductive paste in solar cells, forming electrodes on the front and back surfaces of silicon wafers that collect and transport electricity from sunlight. Around 10-20 mg of silver per watt is used depending on cell technology, accounting for a significant portion of global silver demand. Its conductivity, reflectivity, and corrosion resistance help optimize solar panel efficiency and lifespan.

They coat spacecraft components and visors in astronaut helmets with gold to reflect infrared and ultraviolet radiation, protecting sensitive instruments and human eyes. Silver is also used for reflective coatings and electrical contacts thanks to its conductivity and durability under extreme conditions. Both metals’ malleability and resistance to oxidation are key in space applications where materials face harsh environments.

Silver's superior electrical and thermal conductivity make it useful in semiconductor manufacturing and electronic components. It is used in electrical contacts, solder, and conductive inks. Gold is used in semiconductor components for wire bonding, connectors, and plating because of its excellent conductivity, resistance to corrosion, and malleability for reliable electrical connections. 

Silver ions have natural antimicrobial properties, making silver and its compounds popular in medical devices, wound dressings, coatings, textiles, and water purification. In healthcare settings, silver-infused materials help prevent infection and bacterial growth. Gold shows some antimicrobial effects but is less common for these applications due to the cost. 

Their malleability allows them to be formed into thin foils or coatings, used in electronic, optical, and industrial applications. Silver has the highest reflectivity of any metal in the visible and near-infrared spectrum, making it ideal for manufacturing highly efficient mirrors, reflective coatings, and optical filters. Silver’s plasmonic properties allow efficient control and manipulation of light at the nanoscale, enabling advanced applications in sensors, imaging, photonic devices, and data transmission. Silver thin films and nanoparticle coatings enhance light transmission and reduce optical losses, improving lens and sensor performance. Silver is also used in touch screens, capacitors, and conductive tapes within optical and electronic devices due to its superb electrical conductivity.

Not only have their use cases provided value to people throughout history but academics covering gold and silver have greatly diverse careers. Historians explore the socio-economic impacts of gold and silver, especially their historical roles as currency and stores of value in civilizations. Physicists and materials scientists detail the unique conductive, reflective, and antimicrobial properties of gold and silver, relating them to applications in electronics, optics, and medicine. Mining professionals focus on the geological abundance, extraction challenges, and supply dynamics of gold and silver affecting market availability and prices. Investment professionals and advisors analyze gold and silver for their financial roles generally as portfolio diversifiers and inflation hedges.

Even today there are still emerging fields and information coming out of these seemingly simple metals in the ground. There is a study on how cannabis waste is mixed with gold and silver to treat deadly bacteria. Silver nanoparticles can attach to bacterial cell walls, penetrate them, and disrupt key processes, eventually killing or stopping bacteria. When you mix a solution of gold or silver ions (metal salts) with cannabis waste extract, these plant chemicals act as reducing agents. That means they convert metal ions into tiny solid metal particles. Cannabis waste is cheap, widely available, and full of natural chemicals that reduce metal ions and stabilize nanoparticles. These nanoparticles could be a new way to stop infections in a clean and natural way.

Evaluation

Clearly these metals are truly actually precious and deserve the attention they get. It's fascinating how important they've been to society over history and for different reasons, like even when the use case changed throughout history despite government interventions, they still maintained importance and value. Only once humanity arrived at this point in time did we realize their emerging effects; it doesn't matter what environment humanity is in, these metals always find a way to find importance despite changes that inevitably occur. The claim that gold and silver have remained important to humanity across different environments and eras, shifting their primary roles but never losing significance, is supported by abundant historical and contemporary evidence. The metals have transcended their original monetary function to become critical in modern industry while retaining their traditional roles in wealth preservation and investment. This adaptability illustrates their unique combination of physical and chemical properties that meet evolving human needs, from ancient trade to cutting edge technology. Economists, historians, and scientists alike recognize gold and silver as timeless wealth precisely because they always find new value and applications across social, economic, and technological landscapes.

For this reason they may be considered the ultimate asset with consistent value preservation over millennia, since they have proven throughout history to generate increasing value while not changing what they fundamentally are. Imagine if a company could provide the same service or have the same product forever with its use case changing depending on the environment, not the company adapting to the environment in which it exists. Gold and silver have preserved value over thousands of years, maintaining purchasing power across vastly different historical eras, economic systems, and cultural contexts.

From ancient coins and bimetallic standards to modern financial portfolios, these metals have served as reliable stores of value, an unusual trait compared to most assets which depreciate or lose relevance over major historical time periods. Their fundamental properties of scarcity, malleability, corrosion resistance, conductivity, and reflectivity remain unchanged no matter what environment or era humanity faces. The ability to serve varying needs without losing core value demonstrates a rare asset adaptability without requiring intrinsic change.