Back in China, during the great Ming Dynasty, the exchange rate was 4 ounces of silver to 1 ounce of gold. Interesting indeed as in the country of ancient Egypt silver was thought about as useful as gold. Having said that, the silver gold ratio stayed at around 12 to 1 which unfortunately means it took 12 ounces of silver to buy one ounce of gold.

The strange reason for the 12 to 1 ratio was that gold and silver were in fact very much money. I mean they were going around side by side and in the end the free markets balanced the scales and said it was so. The ratio is in fact figured out by the marketplace doing what it does naturally. The fair market value of something will always rise to the top.

Here is a video from a advanced gold and silver investor and his trading group: http://www.youtube.com/watch?v=Psuo1-os2eo

So what does the 12:1 ratio mean? Going even deeper it would mean that on average there was close to 12 times more silver in circulation than gold throughout history. Again, as stated earlier, it is simply the free market defining the price based on the relative rarity of the 2 precious metals.

Then again, in the late 1800s, discoveries of silver out West and of course technological advancements added considerably to the supply. This and other factors induced the value of silver to drop extensively to 1/100th of gold’s value.

Then Franklin Roosevelt, during the famous Depression, signed the Silver Purchase Act of 1934 and America launched to round up and recover the world’s largest stockpile of silver in history. There were quite a few more silver acquisitions in the 50′s and finally the stockpile peaked at 3.5 billion ounces.

For more information about precious metals, watch this video about how to buy gold and silver coins http://www.youtube.com/buysilverandgold