Because gold and silver are inherently a form of exchange, it is sometimes difficult to accurately measure them with currency. Gold is currently trading at $1,639 an ounce and silver is trading over $31 an ounce, but these figures are pretty relative and can sometimes be misleading.
We all know the Federal Reserve has been pursuing an inflationary fiscal policy. The main weapon the Fed has had against an endangered market has been the fiscal stimulus called Quantitative Easing. We can argue for or against Quantitative Easing as viable method of stimulating an economy that has had extraordinarily serious difficulties over the past four years. But the effect of this stimulus on the money supply cannot be argued.
The Fed has literally injected billions into the markets over the past four years to prop up their value on a notional basis. That many more dollars in existence will necessarily dilute the money supply.
In such a fiscally askew environment, understanding the value of gold and silver can be a little difficult, which is why we have the silver quarter method. All silver quarters minted in the US up to 1964 are 90 percent silver. After ’64, the Fed and US Mint began to debase the currency with more base metals.
A gallon of gasoline cost a quarter in1964, for which you could pay with a newly minted 90 percent silver quarter. In March of 2012, a gallon of gasoline cost over $4 on the national average, but a 1964 silver quarter is worth $5.6605 based on melt value alone. You can pay for your gallon of gasoline with the silver quarter.
In fact, you could buy a gallon of premium and maybe a cup of coffee. This is while there are record-high oil prices on the market and Iran has announced it will shut down the Straits of Hormuz. The power of silver is apparent. It may be priced in dollars, but the value of dollars change over time, particularly with the influx of Federal stimulus money and the machinations of Wall Street markets.
On a purchasing power basis, silver is fundamentally sound and the silver quarter method is perhaps the most practical demonstration of that effect. That’s how to think of gold and silver prices.