Back in China, throughout the terrific Ming Dynasty, the exchange rate was 4 ounces of silver to 1 ounce of gold. Intriguing indeed as in the country of ancient Egypt silver was deemed as valuable as gold. Nonetheless, the silver gold ratio remained approximately 12 to 1 which in turn means it took 12 ounces of silver to buy one ounce of gold.

The mysterious reason for the 12 to 1 ratio was that gold and silver were in fact very much money. I mean they were moving side by side and in the end the free markets balanced the scales and said it was so. The ratio is in fact established by the marketplace doing what it does naturally. The fair market value of something will always rise to the top.

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So what does the 12:1 ratio mean? Going even deeper it indicates that on average there was roughly 12 times more silver in circulation than gold throughout history. Again, as stated earlier, it is simply the free market deciding the price based on the relative rarity of the 2 precious metals.

On the other hand, in the late 1800s, discoveries of silver out West and of course technological advancements added drastically to the supply. This and other factors brought on the value of silver to drop substantially to 1/100th of gold’s value.

Then Franklin Roosevelt, during the famous Depression, signed the Silver Purchase Act of 1934 and America set about to gather and pick up the world’s largest stockpile of silver in history. There were several more silver acquisitions in the 50′s and ultimately the stockpile peaked at 3.5 billion ounces.

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