# Determining the True Inflation Adjusted Silver Price

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by: Joseph Brom

Inflation adjusted silver prices are more difficult to calculate due to silver’s volatility. However, knowing the true inflation adjusted gold price (\$3604.22) and estimating the gold/silver ratio allows a reasonable estimate. The gold/silver ratio fluctuates wildly from a high of 137 to a low of 15.

Depending on the gold/silver ratio used gives a broad array of inflation adjusted silver prices. The tables below shows the currency/gold ratio and the corresponding silver price using a gold/silver ratio of 40, 25 and 15. The gold/silver ratios of 40, 25, and 15 were chosen because when the gold price equaled the currency/gold ratio in 1983 the gold/silver ratio was 38. In 1979, when the gold price equaled the currency/gold ratio, the gold/silver ratio was 23. Finally, in 1980, when the gold price was 214% higher than the gold/currency ratio the gold/silver ratio was 15.

The reader can choose which ratio to use.

 Year Currency/Gold Ratio Gold/Silver Ratio Gold/Silver Ratio Gold/Silver Ratio 40 25 15 2011 \$3,604 \$90.10 \$144.16 \$240.27 2012 \$4,212 \$105.30 \$168.48 \$280.80 2013 \$4,633 \$115.83 \$185.32 \$308.87 2014 \$5,096 \$127.40 \$203.84 \$339.73 2015 \$5,606 \$140.15 \$224.24 \$373.73 2016 \$6,167 \$154.18 \$246.68 \$411.13 2017 \$6,783 \$169.58 \$271.32 \$452.20 2018 \$7,462 \$186.55 \$298.48 \$497.47 2019 \$8,208 \$205.20 \$328.32 \$547.20 2020 \$9,029 \$225.73 \$361.16 \$601.93

Using the inflation adjusted gold price of \$3,604.22 yields and inflation adjusted silver price of between \$90 and \$240, conservatively \$145, depending on which gold/silver ratio is used. Again, since the Federal Reserve Bank’s increases the currency supply on average 11.5% each year. The inflation adjusted silver price will change every year.

The chart illustrates the increase in the currency/gold ratio each year to account for a conservative 10% increase in currency. This yields an inflation adjusted silver price of between \$90 and \$600 depending on how fast silver prices increase.

If the gold price were to repeat its inflation adjusted manic price of \$850, then the inflation adjusted silver prices would change. The table below shows the inflation adjusted mani gold price of 1980 and the corresponding silver price using a gold/silver ratio of 40, 25, and 15. Again the reader can choose which ratio to use.

 Year Manic Gold Price Gold/Silver ratio Gold/Silver Ratio Gold/Silver Ratio 40 25 15 2011 \$8,194 \$204.85 \$327.76 \$543.27 2012 \$9,013 \$225.33 \$360.52 \$600.87 2013 \$9,915 \$247.88 \$396.60 \$661.00 2014 \$10,906 \$272.65 \$436.24 \$727.07 2015 \$11,997 \$299.93 \$479.88 \$799.80 2016 \$13,197 \$329.93 \$527.88 \$879.80 2017 \$14,516 \$362.90 \$580.64 \$967.73 2018 \$15,968 \$399.20 \$638.72 \$1,064.53 2019 \$17,565 \$439.13 \$702.60 \$1,171.00 2020 \$19,321 \$483.03 \$772.84 \$1,288.07

In conclusion, the inflation adjusted silver price today is conservatively \$145, and the inflation adjusted 1980s high of \$50 is \$543. Again, these prices will change each year to account for currency inflation. The actual inflation adjusted prices will depend on how fast the silver price increases and could very well reach \$400 and \$800 on an inflation adjusted basis.

Disclosure: I am long PSLV, CEF, SIL, PHYS.