Thursday, June 3, 2010
My business partner, Dean, came up with this example of how silver has maintained its purchasing power over time. This is a picture of pre-1965 silver quarter, which was made from 90% silver and 10% copper:
In 1964, this coin was worth 25 cents. Back then you could use this coin to buy a gallon of gasoline. Today, if you take this same coin to a gas station, you can buy about 1/10th of a gallon of gas. HOWEVER, if you stop by your local coin dealer, he will pay you roughly the silver-melt value of this coin, which is $3.24 with spot silver a $17.95. You can then take the proceeds to the gas station and buy a little more than a gallon of gasoline.
As you can see, the face value of a quarter has declined since 1964 by 90%. But the silver-melt value of that same quarter has maintained its purchasing power over those 46 years.
With an ounce of gold, this example is even more dramatic. Back in 1964, the price of an ounce of gold was fixed at $35. Today, that same ounce of gold is worth $1210. If you do the math, you will find that the value of the U.S. dollar in relation to gold has declined by nearly 98% since 1964. Got gold? Got silver?
Posted by Dave in Denver at 10:05 PM