Coin collecting changed forever 50 years ago when silver topped
$1.29 an ounce, the point at which a silver dollar was worth more as
metal than as money.
Since the end of World War II, the federal government had propped
up the price of silver, buying it from mines at 90.5 cents an ounce
and selling it at 91 cents. However, increased industrial demand
coupled with market speculation caused the price of silver to rise
above the government rate in the late 1950s. The government stopped
selling silver bullion in 1961. At that time, silver certificates
could be redeemed for silver at the rate of $1.29 an ounce.
Silver dollars contained 0.77344 ounce of silver. When silver
traded above $1.29 an ounce, a silver dollar was worth more as metal
than as money. Likewise, a paper silver certificate was worth more as
a proxy for bullion than as money.
Silver half dollars, quarter dollars and dimes contained 0.72338
ounce of silver for each dollar of face value. The tipping point for
these smaller coins was $1.38 an ounce. Above that value, the coins
were worth more as bullion than as coins.
In November 1961 silver stood within a fraction of a cent of $1.
In January 1962, it crossed the $1.25 mark. Treasury officials told
the Associated Press in January they were not alarmed. They doubted
there would be a rush to redeem more than $1 billion in paper money
that was backed by silver. And, they noted, no such rush occurred in
1919 when the metal spiked at $1.3825 an ounce.
But on June 5, 1963, President Kennedy signed a law authorizing
the printing of $1 Federal Reserve notes to replace silver
certificates. The move was expected to free the certificates’ backing,
an estimated $1.3 billion in silver, for coinage.
Silver, though, kept rising in value. In the fall of 1963, it
topped $1.29 an ounce.
In November 1963, Dr. Vladimir Clain-Stefanelli, curator of
numismatics at the Smithsonian Institution, told syndicated financial
columnist Sylvia Porter, “We have reached the point where silver is
too precious to be used as a coinage material.”
The Mint produced massive amounts of silver coins in 1964, but
switched to clad coins in 1965. Dimes and quarter dollars were struck
on copper-nickel clad planchets. Half dollars were 80 percent silver
through 1970, when even that was too expensive to produce.
Curiously, as bullion prices were rising in 1963, the Kennedy
administration asked Congress on Nov. 21 to authorize the coining of
silver dollars for use by gambling casinos. Those 1964-D Peace dollars
were struck in May 1965, at the Denver Mint, but all were melted in
the face of rising prices.
Gerald Tebben is editor of the Central States Numismatic Society’s Centinel.