Forex Marets: Silver’s Relationship with the U.S. Dollar
Silver’s Relationship with the U.S. Dollar
Silver’s relationship with the U.S. Dollar has gone through some interesting changes over the years. If silver and the dollar were friends on Facebook the relationship status would definitely say “It’s complicated.” How have silver and U.S. currency worked together to keep the economy moving throughout the years? What does silver have to do with our economy right now? Could silver become more or less important in relation to the U.S. Dollar in the future? This article will briefly address these questions.
Silver & U.S. History
To start, it should be understood that there are rare silver coins that are collectibles used for investment and these will have higher percentages of silver content relative to coins that are used as common currency. But there is still a strong relationship between these two types of assets. The U.S. Mint’s original coins were comprised of at least 90% silver.
Things changed in 1965, when the silver content was lowered to 40%. These days, your typical quarter is only worth about 3 cents – far short of the 25 cents it claims to be worth. As silver grew more valuable and U.S. assets shrank, the Federal Reserve had to find a way to keep minting coins without using up all of its silver reserves. These days, you can buy “junk nags” of pre-1965, 90% silver coins. Just make sure your kids don’t use them for vending machine prizes.
Silver’s Rise in Modern Society
Chart Source: Atlanta Gold & Coin Buyers
Silver is a major player in various industries around the world. It is an excellent conductor and compared to other precious metals it is extremely affordable so it’s a valuable tool for chemical engineers and electricians, as well as makers of computers and appliances. Silver is also used heavily in jewelry, and even investors (both of the household and institutional varieties have taken a real shine to silver over the last 10-15 years.
The Future of the Red, White, Blue…and Silver?
The 37% gain that the silver spot price has experienced in the last 365 days makes it likely that investors will continue to look to “the poor man’s gold” for portfolio diversification. Industrial use of silver will probably remain high, even if the metal’s spot price continues to rise because there are very few other materials that have all the chemical capabilities of silver. Some people have claimed that the government could nationalize the silver market to add value to the greenback, similar to the way the gold market was nationalized from 1933-1971. There is no basis in fact for this conspiracy theory yet, though, so, for now, silver buyers can rest easy and stockpile as much silver as they want for their various needs and uses.