Thursday, 8 December 2011

Inflation Adjusted Historic Silver Price - Pounds Sterling and US Dollars

Every day you hear about Gold or the price of Gold mentioned.  Occasionally you see a chart of the historical price or if you are really lucky, the historical inflation adjusted Gold price (almost always in US Dollars).  A couple of months ago I calculated and posted the historical and inflation adjusted Gold price in Pounds Sterling and US Dollars since 1900 (see hereUpdated Inflation Adjusted Gold Price - US Dollars and UK Pounds).  Now I will show the both the historic Silver price and historical inflation adjusted Silver price in US Dollars and GB Pounds.

The annual average Silver price data came from and it went back to 1792.  The Historical UK Pound to US Dollar exchange rate data came from Lawrence H. Officer, "Dollar-Pound Exchange Rate From 1791," MeasuringWorth, 2011 at  

The prices were adjusted for inflation by converting the nominal price into the equivalent in 2010 US Dollars and 2010 GP Pounds Stirling.  The US inflation data came from the historical CPI from the US Department of Labor.  The UK inflation the data came from Dominic Webb (2006) "Inflation: the Value of the Pound 1750-2005" Economic Policy and Statistics Section, Research Paper 06/09, House of Commons Library, UK.  From this you get the following results shown in the graph below. 

Chart showing the historic price of silver and the inflation adjusted silver price since 1792 to 2010 in Pounds Sterling and Dollars
Historical Annual Average and Inflation Adjusted Silver Price Since 1792 in US Dollars and GB Pounds

The doted lines are the unadjusted annual average Silver price, and the sold lines are the inflation adjusted Silver price.  The first thing that becomes obvious is that the unadjusted Silver piece bottomed in the 1930s, in both UK Pounds and US Dollars at £0.07 and $0.25 per troy ounce respectively.  

However when you examine the inflation adjusted Silver price you observe that it has bottom at around the same price (approximately £4 and $4 in 2010 value) at the beginning of the each of the following decades, 1930s, 1940, 1990s and 2000s.  In fact, for much of the 20th century (from the 1920s to mid 1960s and from the early 1990s until the mid 2000s) the inflation adjusted Silver price has been very low compare to the long term historic average, (which was approximately £15 and $17 in 2010 value).  Below is the inflation adjusted Silver price in UK Pounds and US Dollars indexed back to 1800

Graph showing the index inflation adjusted silver price is cheaper than it was from the 1810 till 1890's
Historical Inflation Adjusted Silver Price Since 1792 in US Dollars and GB Pounds, Indexed to 1800

The second thing that you observe is that the average Silver price in 2010 is now above the long term inflation adjusted historical average.  The price that year was comparable to the price from the mid 1890s until the 1920s. 

It is also interesting to note the compounded rate of change for the inflation adjusted Silver prices index in US Dollars and GB Pounds, tracked each other pretty closely for the majority of the 20th Century.  However before then, there was a sustained period of time since the 1820s when inflation adjusted Silver price indexed to 1800 was significantly larger in Dollars than Pounds?

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