A K Agnihotri: The lure and allure of silver


THE love and lust for the precious metals is not confined to India alone and the brief history of silver below details the genesis of the infatuation with the metal:

3000 BC: A concentrated effort to mine silver began.

2500 BC: The ancient Chaldeans (modern-day Turkey) created a ‘cupellation’ process to extract silver from lead-silver ores in the first documented sophisticated processing methods.

1600-1200 BC: The collapse of the Minoan and Mycenaean cultures shifted the focus of silver production to the mines of Laurium (near Athens) to provide for the fledgling Greek civilisation.

550 BC: First silver coins were minted in the eastern Mediterranean.

269 BC: The Roman Empire adopted silver as part of its standard coinage and it was used throughout the trading world.

206 BC-220 AD: During the Han Dynasty, silver coin was included in the official  currencies of China, but it was limited to use by the royal family only.

708 AD: Silver was coined for the first time in Japan under the reign of Emperor Genmyo. But it was soon abandoned in favour of copper because of meagre production levels.

775 AD: The Saxon kingdoms issued silver coins known as “sterlings”, 240 of them being minted out of one pound of silver, the weight of which was probably Continued equal to the later troy pound.

750-1200: Several major silver mine discoveries occurred in Central Europe, including Saxony region in Germany.

8th Century: Silver mining was temporarily halted by the Moorish conquest of Spain. Spain dominated silver mine production in the first 1,000 years AD.

1279-1368: During China’s Yuan Dynasty, silver ingots were widely used as a form of currency. In the Ming Dynasty, silver ingot became the main currency in circulation until the end of the Qing Dynasty in 1911, China’s last dynasty.

1492: Columbus’ discovery of the New World was a significant milestone that led to the founding of major mines in Mexico, Bolivia and Peru that were to account for over 85 percent of global silver production and trade from 1500 to 1800.

1545: Discovery of Potosi, Bolivia and the Cerro Rico silver ore mine, which was deemed the world's greatest silver deposit. Production peaked in 1615.

1500-1600: The eight Reales coin, or "piece of eight", was the most common silver coin of late 16th and 17th century Spain. As trade became a global activity for the first time, it became the international currency.

1500-1800: Mexico and Peru produced about 85 per cent of the world’s silver, with an estimated accumulated output between 70,000 to 150,000 tonnes. About 40 percent that silver wound up in China by some estimate. The Spanish silver coins, known as “pieces of eight”, were in circulation between the late 16th and late 19th century.

1792: U.S. Treasury proposed the adoption of a gold and silver-based monetary system.

Oct 15, 1794: The first official U.S. silver dollar was minted, in accordance to the Coinage Act of 1792.

1858: Silver ore was discovered in Nevada, causing palpable excitement in the US akin to the California Gold Rush 10 years earlier.

1862: The US Congress passed a law authorising paper “:greenbacks” as legal tender for all public and private debts, except duties. However, this legal bind did not void specific provisions in contracts that demanded gold/silver payment.

1873: The Coinage Law of 1873 demonetises silver, as unlimited legal tender status and free coinage is renounced.

1875: The Resumption Act of 1875 that was enacted in 1878 established the U.S. as the de facto monometallic gold standard. This foreshadowed the increased demand for gold and decreased demand for silver as a monetary reserve in the world, thus leading to a dip in market prices.

1890: Under the Shelman Silver Purchase Act,of USA 4.5 million ounces of silver is coined monthly.

Oct 30, 1893: The Shelman Silver Purchase Act was repealed to resolidify the gold standard, on the back of falling gold reserves of the US Treasury from a peak of $320 million in 1888 to $189 million in 1893.

March 6, 1933: To curb mass panics and bank runs, President Roosevelt declared a four-day Bank Holiday to stop hoarding and export of gold and silver. The “Emergency Banking Act” passed on Day 3 shut down banks, which needed to be deemed “financially secure” to be reopened.

1900: The Gold Standard Act of 1900 officially renounced bimetallism, and pegged the U.S. currency to gold.

1946: The Silver Purchase Act of 1946 rendered the U.S. government the biggest buyer of silver in the world. The Act also bound the government to sell at a fixed price.

1934: In accordance to the Silver Purchase Act of 1934, US President Roosevelt issued an executive order to confiscate and nationalise silver, and outlawing private ownership of quantities of more than 500 troy ounces.

1965: The US government eliminated silver from quarters and dimes, and half dollars were reduced to 40 percent silver.

1973: The Hunt Brothers, sons of the late Texan oil tycoon Haroldson Lafayette Hunt Jr, began cornering the silver market.

Jan 18, 1980: Silver hit an all-time high just below $50 an ounce, when gold prices also rose dramatically in response to the Soviet invasion of Afghanistan. Silver prices dipped to about $15 an ounce by the end of that year.

1988: The Hunt Brothers were charged for conspiracy to corner the silver market, and fined $134 million in compensation to a Peruvian mineral company. The brothers declared bankruptcy.

1997: In 1997 and 1998, Warren Buffet bought about 130 million ounces of silver.

2010: Spot silver rose to successive 30-year highs, and prices gained more than 80 percent, outperforming gold.

April 25, 2011: Spot silver rose to $48.84 an ounce and US silver futures to $49.82, highest since 1980.

October 28, 2011: Silver and Gold prices stagnate after the crash from recent highs.

*1 troy ounce = 31.1034768 grams

In Ancient Egypt and Medieval Europe, Silver was often more valuable than gold. Besides, India has always had an insatiable demand for precious metals. Even though, silver was never mined in India, yet India has the largest private horde of silver. In the absence of any official figures one can only do some guesstimates.

Ancient India was one of the earliest issuers of coins in the world (circa 6th century BC), along with the Chinese Wen and Lydian staters. The origin of the word "rupee" is found in the word rup or rupa, which means “silver”.. The Sanskrit word rupyakam means coin of silver. The derivative word Rupaya was used to denote the coin introduced by Sher Shah Suri during his reign from 1540 to 1545 AD. The original Rupaya was a silver coin weighing 175 grains troy (about 11.34 grams). The coin has been used since then, even during the times of British India. Formerly the rupee was divided into 16 annas, 64 paise or Pice, or 192 pies. In Arabia and East Africa the British India rupee was current at various times, including the paisa and was used as far south as Natal. In Mozambique the British India rupees were overstamped, and in Kenya the British East Africa company minted the rupee and its fractions as well as Pice. It was maintained as the florin, using the same standard, until 1920. In Somalia the Italian colonial authority minted 'Rupia' to exactly the same standard, and called the paisa 'besa'. Early 19th century E.I.C. rupees were used in Australia for a limited period.

Historically, the rupee was a silver based currency. This had severe consequences in the 19th century, when the strongest economies in the world were on the gold standard. The discovery of vast quantities of silver in the U.S. and various European colonies resulted in a decline in the relative value of silver to gold. Suddenly the standard currency of India could not buy as much from the outside world. This event was known as “the fall of the Rupee”.

The Hunt Brothers:

From 1973 the Hunt Brothers began cornering the market in silver, helping to cause a spike in January 1980 of the London Silver Fix to $49.45 per troy ounce, silver futures to reach an intraday all-time high of $50.35 per troy ounce and a reduction of the gold/silver ratio down to 1:17.0 (gold also peaked in 1980, at $850 per troy ounce). In the last nine months of 1979, the brothers were estimated to be holding over 100 million troy ounces of silver and several large silver futures contracts.  However, a combination of changed trading rules on the (NYMEX) and the intervention of the Federal Reserve Bank of USA put an end to the game. Interestingly, the western press never recognised the contribution of the outward smuggling of silver from India in the collapse of the Hunt Brothers. At one time the outflow was so strong that Government had to ban the export of silver and classified it as a specified commodity. The collapse of the silver prices abroad saw the silver coming back to India and by 1982 when the  London Silver Fix had collapsed by 90% to $4.90 per troy ounce, India had not only recovered the silver exported but added to its existing horde.


Silver is not only being treated as a substitute of Gold but is also being extensively used in alternative energy segment. The industrial applications of silver have increased by almost 21% to 487.4 million ounces.

In 2010, the demand for silver coming from global investment and fabrication demand increased substantially. According to World Silver Survey, the demand for silver during 2010 increased despite of a 38% average increase in the price of silver to $20.19. The increase in silver prices during 2010 was the largest gain since 1980. Silver investments demand increased by 40% in 2010 to 279.3 million ounces, double that of 2009.

The growth of silver globally is a staggering growth to 582.6 million ounces during 2010, an increase of 114.9 million ounces over 2009. The demand is being fuelled by:

• Silver used in coin and medal production rose by 28% to 101.3 million ounces.

• Sales of U.S. Silver Eagles reached 34.6 million, far ahead of the previous record of 29 million reached in 2009.

• Sales of bullion coins by mints in Australia and Canada also hit new highs.

• Investors also purchased 55.6 million ounces of silver in the form of bullion bars during 2010.

• Silver fabrication demand hit a ten year high of 878.8 million ounces, an increase of almost 13% over 2010.

• Jewellery demand increased by 5%, showing the biggest increase in since 2003.

The list of uses for silver in industrial applications is endless. New uses are developed daily. Silver has more varied industrial applications than any other metal, by far. Silver is the best conductor of electricity, the best heat transfer agent, the best reflector of light, a marvellous lubricant and a versatile catalyst and alloy. It’s a biocide and has important medical uses. Silver has had traditional medicinal value in many cultures. The ancient Egyptians, Greeks and Romans recognised the medical applications of silver. Hippocrates, the ‘Father of Medicine’, wrote that, silver had beneficial healing properties and protected against disease.

The ancient Phoenicians, Greeks, Romans, Egyptians and others stored water, wine, and vinegar in silver bottles to prevent spoiling. Silver is also used in Ayurvedic and Homeopathic medicine.

“Born with a silver spoon in his mouth” is not a reference to wealth, but to health. In the early 18th century, babies who were fed with silver spoons were considered healthier than those fed with spoons made from other metals, and silver pacifiers found wide use because of their beneficial health effects.

            To be continued