Was Gold undervalued or was Silver overvalued in Ancient times?

Discussion in 'Bullion Investing' started by Gam3rBlake, Jun 8, 2021.

  1. Gam3rBlake

    Gam3rBlake Supporter! Supporter

    Back in Ancient Rome around the time of Julius Caesar (before coins began being debased later in the Empire) a nearly pure gold aureus of 8 grams was worth 25 denarii of ~4 grams each.

    In other words the Romans valued 8 grams of gold as equal in value to 100 grams of silver.

    That’s about a 12.5 to 1 ratio of silver to gold.

    As recently as 1932 20x 0.77 oz silver dollars were worth an almost 1 oz gold Double Eagle. 20x Morgan Dollars & 1x Double Eagle were both $20 in value.

    A ratio of about 15 to 1. Pretty close to Ancient times.

    Today if you tried to trade 15 oz of silver for 1 oz of gold a dealer would think you’re bonkers as the ratio is now closer to 65 to 1.

    Do you think gold was undervalued or was silver overvalued in Ancient times?

    Or do you think both were valued correctly and today they are valued incorrectly?

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    Last edited: Jun 8, 2021
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  3. Kentucky

    Kentucky Supporter! Supporter

    I hesitate to suggest you search CT for a thread about "playing" the GSR - Gold to Silver Ratio... In stopped reading it some time ago
     
  4. Gam3rBlake

    Gam3rBlake Supporter! Supporter

    Im not trying to play anything.

    Im just curious what the cause of gold being worth triple what it was relative to silver in Ancient times is.
     
  5. Kentucky

    Kentucky Supporter! Supporter

    I never suggested you were.
     
  6. Gam3rBlake

    Gam3rBlake Supporter! Supporter

    Fair enough. I thought you were suggesting I was trying to profit off of the fluctuating ratio or something.

    Truthfully I’m just wondering why gold suddenly shot up in value relative to silver in the last century when it was relatively stable for several millenia at ~12-20 to 1.
     
  7. Kentucky

    Kentucky Supporter! Supporter

    That is/was the purpose of the thread, playing the GSR to make money. I think they mentioned some historical points. I really don't know myself.
     
  8. yakpoo

    yakpoo Member

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  9. Gam3rBlake

    Gam3rBlake Supporter! Supporter

    Yeah that’s what I’m saying it’s remained between 10-15 to 1 for thousands of years from Ancient Rome under Caesar all the way until the Coinage act of 1792 it remained stable.

    But between 1932 and today the value of gold relative to silver has more than tripled.

    Why?
     
  10. yakpoo

    yakpoo Member

    GoldSilver-Ratio-Timeline.jpg

    Top 5 Highest Years for the Silver/Gold Spot Ratio
    • 1941 - 101.4
    • 1939 - 100
    • 2020 - 99.3
    • 1940 - 98.6
    • 1990 - 93.2
    Top 5 Lowest Years for Silver/Gold Spot Ratio
    • 1967 - 15.4
    • 1919 - 15.7
    • 1862 - 16
    • 1872 - 16.3
    • 1874 - 16.6
    https://howmuch.net/articles/gold-silver-ratio-timeline
     
    GH#75, TopcatCoin and Gam3rBlake like this.
  11. Robert Ransom

    Robert Ransom Well-Known Member

    I suspect supply was the factor. I read somewhere, years ago, Ancient Egypt valued silver higher than gold and if I recall correctly, the reason was the scarcity of silver, however, my memory may be faulty.
     
  12. medoraman

    medoraman Supporter! Supporter

    Ancient western and near eastern cultures valued both metals. Therefore the exchange rate was their relative rarity. Today, though, we have cultures only valuing gold, so it distorts the ratio. Not everyone values each, so the ratio now does not track rarity. Most metal prices do not track rarity. Look at all of the metals much rarer than gold like osmium that sell for less.
     
  13. Gilbert

    Gilbert Part time collector Supporter

    Great idea for a thread! My thinking is that supply and demand determine the ratio. (forgetting what JPM does to influence thingso_O)
     
  14. eddiespin

    eddiespin Fast Eddie

    Somebody ought to do a study. I'll bet the dentists are just crowning more teeth, these days.

    "Ah, as long as there's no find, the noble brotherhood will last. But when the piles of gold begin to grow, that's when the trouble starts." -Walter Huston, The Treasure of the Sierra Madre (1948)

    Actually, it might have more to do with this, chances are...

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    upload_2021-6-8_9-16-33.png
     
  15. kaparthy

    kaparthy Supporter! Supporter

    The ratio was the correct one for the times and places because markets were open across the entire Roman world. As noted here above, by Robert Ransom, local variations existed, but as nothing but tranport costs prevented import and export, the price was the right one for there and then.

    There was no official, legal, enforced alternative to the market place. What the mints at Rome did set their buy/sell prices. But if they had been greatly off, then there would have been a agoric flow from one metal into the other on the streets. It did not happen.

    One thing that did happen is that in the late empire, people had their silver coins made into silver housewares. When the barbarians took the goods, they did nothing with them. Hoardes languished in cellars during the Dark Ages.

    Also, as a point, we think of gold and silver. As common as silver was 2000 years ago, Roman thinking, trade, and commerce, was in sesterce, bronze coins.
     
  16. mpcusa

    mpcusa "Official C.T. TROLL SWEEPER"

    Probably because there was more of it and
    could be used easier for trade.
     
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  17. kaparthy

    kaparthy Supporter! Supporter

    It did not apply to numismatists.
    Pres. Roosvelt's first Secretary of the Treasury was William H. Woodin, author of The United States Pattern: Trial and Experimental Pieces (1913). The exception to the exception limited the number of quarter eagles ($2.50) in your collection. No other limits were imposed on pre-1933 gold coins.

    Even ordinary people were allowed to hold on to $100 in gold coin, about three month's wages for the average worker. The Thomas Elder catalog of April 14-15, 1933, carried a letter from William H. Woodin assuring collectors that they could own gold coins -- both rare examples and souvenirs .Moreover, Numismatic Scrapbook magazine, founded 1935, gave the spot prices for gold and silver every issue.

    There were some egregious exceptions.

    However, in 1954, the Federal Reserve Bank of Cleveland sent a letter to its members telling them not accept gold coins from depositors, but to direct people to take their gold coins to coin dealers.
     
  18. eddiespin

    eddiespin Fast Eddie

    It opened up the bullion to the market. It let the precious metals market dictate the bullion prices. The numismatics market is an entirely different market that naturally bottoms-out at the spot prices for the respective bullion. Look at any price-controlled market when the restraints are lifted, they respond the same way...
     
  19. Robert Ransom

    Robert Ransom Well-Known Member

    In Ancient Times, gold and silver were valued correctly according to the standard of that time. Today's values of these metals reflect the standard used today. It becomes irrelevant to compare the two other than for generating a conversation which become moot, if you think about it. Just saying...
     
  20. CaptHenway

    CaptHenway Survivor

    Probably neither was over- or under-valued. THe Law of Supply and Demand set the price ratios.

    The problems occur when a nation tries to violate the Law of Supply and Demand to keep an existing coinage viable, a la U.S. pre-1834 gold, instead of melting it all down and starting over at the new ratios, a la 1853 silver.
     
  21. Tall Paul

    Tall Paul New Member

    Silver was a scarcer metal in ancient times. Out of all the treasures found buried with King Tut there was, I believe, one silver object. Interestingly there was also just one object made of iron. Both iron and silver require more advanced metallurgical techniques than gold to be processed into functional objects. Gold is also much more malleable and easier to work than silver.
     
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