Source: Gold Newsletter - August 1982

200 YEARS (1781-1982) OF GOLD PRICES IN THE U.S.

by Lcdr. David Williams (Ret.) The fascinating chart below plots the gold price in the U.S. over the past 200 cycle between 1781 and 1980.

The chart also shows a 5 year, 5 nesting points, evidence of a 22.11 year cycles between 1781 and 1980.

The chart also shows a 5 year, 5 month cycle in gold prices between March, 1969, and January 21, 1980. Although cycle analysts would not give much credence to a cycle which has only had two repetitions, this instance is the "exception that proves the rule" for the following reason: The Foundation for the Study of Cycles discovered a 5.58 year cycle in silver prices which has had 13 repetitions since the turn of the Century. This cycle correctly predicted in advance the peak in silver prices which occurred on January 21, 1980, the same day that gold prices peaked at $850! The ideal low of the silver cycle comes at 1982-83, which is October, 1982, and the next peak comes in August-September, 1985. Gold has been acting like a commodity since it was demonetized in August, 1971. It is expected to move in parallel with silver and, thus, should make its 1982 low and 1985 high about the same time that silver does. The chart shows a theoretical low at $315 in August, 1982, where the Downtrend Line from September, 1980, intersects the Long Range Uptrend Line that starts in 1970. (Gold dropped to $312 on March 15, 1982 from which it rallied to $366.75 and dropped dramatically again to under $300 on June 21st. Since then gold has had a rise rally to the 350 area. Thus the long term support line was not invalidated.) Scale purchases of gold and gold-related assets should prove rewarding.

Source: Gold Newsletter - December 1982

80 Years of U.S. Silver Prices

by Lcdr. David Williams (Ret.)
Silver has a long and interesting history. Recent archaeological excavations of the ruins of the ancient Syrian cities of Mari and Ebla, revealed that the merchants of those cities used silver and gold to facilitate trade, in the ratio of 5 ounces of silver to 1 of gold, as early as about 3000 B.C.

Over the succeeding centuries the ratio has fluctuated widely, rising as high as 72 to 1 in the depression year of 1932. On January 21, 1980, when both pre-cious metals reached their highest prices since the

Revolutionary War, the ratio was 17.7 to 1 (gold at $850, silver at $48). It is currently, December 3, 1982 at 42.60 to 1 (gold at$44l .00, silver at $10.35). The American Revolutionary War was largely financed by the issuance of paper money - Continental Currency. Professors Warren and Pearson of Cornell University, in their classic book, Prices (1933) relate that on May 31, 1781 one dollar of hard currency (silver-gold) exchanged for $400 to $1000 of paper money. That meant that silver was worth $516 and gold $19,390 an ounce, at the then prevailing price at $1.29 an ounce for silver and $19.39 an ounce for gold! While silver was the money of every day life in the Greek city states until the 6th Century B.C., the money of the Roman Empire consisted of crude copper bars or ingots, which were weighed by the merchants at each transaction until the reign of King Servius TuIlus (578-534 B.C.), who was the first ruler to stamp the weight on these bars or ingots. Not until 269 B.C. was silver coined in Rome, at which time a Bimetallic Standard was es-tablished between copper and silver. DEBASEMENT OF CURRENCY CONTINUES In England, silver had been the common measure of value up to A. D. 1377, when silver and gold coins were used in the ratio of 16 to I up to 1816. But France and most of the other European countries used a 15 to 1 ratio, so silver drifted to France and gold to England, until 1816 when England abandoned Bimetalism and went on the Gold Standard. Most of the countries of Continental Europe began to demonetize silver in 1873, which threw large amounts of it on the market as metal and decreased its value. Incidentally, the pound sterling was an actual pound in weight of silver containing 5400 grains (troy) with a purity of 92.5%, or 4995 grains of pure silver (troy). But, then came the debasement of the currency. Debasement of the pound sterling took two forms; some kings reduced the weight of the coin, while others reduced the percentage of silver. Thus, by the time of Queen Elizabeth's Great Recoinage Act of 1560, the weight of pure silver in the pound sterling had fallen to 1761 grains (troy). The most rapid debasement of silver came after a long period of declining commodity prices. In the United States, the 15 to 1 ratio established in 1792 undervalued gold. So gold began to disappear from circulation. To correct this situation, Congress on June 28, 1834 changed the ratio to 16 to I, at which rate gold was slightly overvalued and silver undervalued. Hence, silver coins began to disappear from circulation. Recognizing this fact of life, Congress by the Act of February 12, 1873 (the "Crime of 1873") omitted the free coinage of silver privilege and omitted the silver dollar from me coinage system. This put me U.S. on me Gold Standard (de-facto), but it was not until the Gold Act of March 14, 1900, mat the Gold Standard became official (de jure). The cumulative effect of silver's devaluation in Europe and the United States was a decline in the price of silver that was unprecedented in history. From the 1873 price of $1.2995, silver fell to an all-time low of 24 in December 1932, during the world-wide Depression of the 1930s. As the accompanying chart shows, silver rose from 60 to 65 during 1900, as large quantities of silver were coined into Rupees by the Indian Government. It then declined to 47 in 1902 as China dumped silver on the market in order to raise money to pay the Boxer Rebellion Indemnity. A second rise occurred to 72 in December 1906 due to Indian Government purchases. This rise was halted by me Panic of 1907, and the price dropped to 47 in December 1908. A third rise brought the price up to 64 due to further Indian Government purchases. The following decline, propelled by the outbreak of World War I, brought the price down to 46 in August 1915. Thus we have a Triple Bottom, i.e., 47 in 1902, 47 in 1905, 46 in 1915. This formed a broad base from which the price of silver shot up to a high of $1.37 in October 1919. This phenomenal rise was due to three causes: (1) Increased demand from the allies for silver coinage. (2) The purchase by the British Government of 300,000,000 ounces of silver for shipment to India during 1918-1919. (The natives distrusted British paper money.) (3) Heavy Chinese buying after U.S. Government price restrictions were lifted. See Chart.

U.S. ABANDONS GOLD STANDARD On April 19, 1933, the U.S. Government abandoned the existing Gold Standard and began to purchase foreign silver under the Silver Purchase Act of June 19, 1934. As the U.S. Government increased its buying price for both domestic and foreign silver, me price went up, aided by heavy speculative purchases, to 82 in April 1935. Profit taking by speculators and the lowering of Government buying prices brought the price down to 35 in June 1939. On July 10, 1938 the U.S. Government buying price of 35 for foreign silver supported the price until November 28, 1941 when World War 2 purchases by industry raised the market to 35%, which the Office of Price Adrninistration (OPA) on March 21, 1942 established as its ceiling price for foreign silver. On August 31, 1942 OPA raised me ceiling price of foreign silver to 45. But on October 1, 1942, the War Production Board (WPB) restricted foreign silver purchases to essential uses only, while the price for domestic silver was set at 71.11 cents. When WPB relinquished all control over silver prices on August 20, 1945, OPA raised the ceiling price of foreign, domestic, and Treasury silver to 71.11 cents on September 21, 1945. The price went up to 90 and on November 1, 1946 OPA abolished ceiling prices, whereupon the price declined to 60 in June 1947. The price rose slowly back to 90e in January 1951 under the impetus of the Korean War. The rise was stopped upon the imposition of Wage and Price Controls in March 1951. Profit taking caused a decline to 82 in June 1952, from which level the price rose to 85e in January 1953 and continued at that level to January 1955. It rose to 90e in May 1955 and stayed at that level until October 1956 when it rose fo 91.375 It fluctuated between 88.625 and 91.375 for the next five years. It rose to $1.29 in July 1963 and remained at that level until May 1967. In June 1963, the Silver Purchase Act of 1934 and all subsequent silver legislation was repealed. A mild silver hysteria became endemic - a collecting and hoarding craze swept the country. The demand for silver coins was met by the 1700 million ounces of silver bullion in the U.S. Treasury. The U.S. mints had to work overtime to keep up with the demand. From mid-1959 through mid-1964 the Mint had increased the output of silver coins from 1.6 million pieces to 4.3 million pieces. Silver certificates could be redeemed only in silver bullion at the historic price of $1. 2929 per ounce. By the Coinage Act of 1965, the half dollar coin was cut from 90 to 40 percent silver, and all the silver was omitted from the dimes and quarters which were made of cupronickel clad on a copper core. On July 14, 1967 the U.S. Treasury ceased all sales of silver at the old monetary value of $1. 2929 an ounce. This, plus a 9-month copper strike produced an explosive situation and silver shot up to $2.565 an ounce in June 1968. Thus, the demonetization of silver in the U.S., which began with the elimination of the silver dollar from the coinage in 1873, then the elimination of silver from the subsidiary coins in 1965, was finally completed on June 24, 1968 when the right to redeem silver certificates was denied. As Roy W. Jastram so aptly put it in Silver-The Restless Metal (1981): "First the silver went from the coinage; then the silver backing was removed from the paper . . . We have escaped from clipped, debased, and manipulated coinage into manipulated, debased and politicized paper - not much of an exchange. World stability rests on money. Where can discipline be found?" From the 1968 peak of $2.565 the price of silver declined to a low of $l .27 in November1971. On December18, 1971 the U.S. dollar was devalued by 7.9% and on August 10, 1972, the U.S. Government removed the ceiling price on silver. Massive speculation carried the price of silver up to a high of $6.70 an ounce on February 26, 1974. Profit-taking forced the price down to a low of $3.81 on January 28, 1976. Then began a rise unparalleled in silver's history, aided by wealthy speculators, who attempted to "corner" the market. The peak occurred on January 21, 1980 at $48.00 an ounce. But the collapse was even more drastic; for the price declined to $11.10 on March 28, 1980, when the Federal Reserve Board induced the bankers to grant the Hunt Brothers of Dallas, Texas a loan of $1 Billion in order to avoid the inevitable bankruptcy of banks and brokerage houses that had become involved. The New York Stock Market had suffered a severe decline, which became known as the "Hunt Debacle."

The price rallied and then made a "Double Bottom" at $10.80 on May 22, 1980, which formed the base for a rally to $24.25 on September 22, 1980, which became the "Head" of a second "Head and Shoulders Top" (the first one had occurred on January 21, 1980). Prices then continued their decline until June 21, 1982, when a low of $4.885 was recorded. The price then rallied to $10.35 on December 3, 1982. SILVER PRICE CYCLES Gertrude Shirk, Editor, "Cycles", the official organ of the prestigious Foundation for the Study of Cycles, began an in-depth study of cycles in silver prices from 1850, which were published in Cycles Magazine beginning in June 1974. She found the following four cycles: 31, 15.36, 9.26 and 5.58 years, of which the latter was the most important, having repeated 13 times since 1900. Readers are cautioned that while Shirk correctly predicted in advance that the ideal peak of the 5.58 year cycle would occur in January 1980, followed by a low in August 1982, the violence of the price movements were solely the result of massive speculative attempts to "corner" the silver market, with its inevitable aftermath - collapse. CONCLUSION: Based on technical and cycle studies now is the time to begin accumulating silver.