The Premier Silver Resource Website

Live Spot Silver
Silver Market Articles
Silver Discussions at the Forum
Silver Company Links
Silver Market Updates
Silver & Gold Headlines
Silver Stock News
Silver Equity Quotes
Silver & Precious Metals Quotes

Silver in a Deflation

By: David Morgan, Silver Investor,

-- Posted 27 February, 2009 | | Discuss This Article - Comments: Source:

How does silver perform during a deflation? A question many of our readers have asked.


Today, most investors are fairly convinced that gold does fairly well during a deflationary environment. Since gold has held better than all asset classes these past several months, many mistakenly believe that gold does best during inflations, but they are not sure about gold during deflations. The fact is, from times past, gold actually does best during deflations, rather than inflations.


The seminal work on this topic was produced by Professor Roy W. Jastram of the University of California at Berkeley when he penned the book called, The Golden Constant. Jastram stated that during the preparation of his book, he found that, throughout the centuries, the history of silver was intertwined with gold. The two metals were found together in nature, were combined in the artifacts of man, and were held precious throughout the world when used as coinage. Both became the means by which wealth was measured and commerce carried out. However, where gold maintained its value over long periods of time, even centuries, silver’s movement in the monetary history was erratic and volatile. So, Professor Jastram asked the fundamental question you are asking, “Just how does silver perform during inflations or deflations?”


Precious metals have a long-standing reputation as hedges against inflation. Jastram writes, “This is not valid based on evidence of a century and a half in the United States and more than three centuries in England. The truth is, in most cases, the two metals, yes, both silver and gold, gained operational wealth in deflations.” From a long-term perspective, gold has held its purchasing power very well in the United States.


His report went on to say just how silver fared in relation to gold, and the findings are quite significant to those in the silver community. As stated previously, silver has a history of being much more volatile than gold and remains so to this day. There were periods where silver actually outperformed gold and periods when it underperformed. This is historic fact and yet might give a serious student pause to reflect upon the presumptions and beliefs held about silver.


If only one metal had to be chosen to protect your wealth, the answer from history would be the gold market. However, the most recent timeframe studied by Jastram, which was inflationary, revealed a significant out-performance of silver over any other commodity, including gold. But I must emphasize that the timeframe covered a long period when the price of gold was still fixed by government edict.


Regardless, the facts from the past cannot be refuted. The average price for silver in 1978 was $5.40 and the average price in 1979 was $11.09. But between 1978 and January 21, 1980, silver increased nearly tenfold.


As I have stated many times, the easy money has been made in the precious metals but the BIG money lies ahead, because if you think like I think, once this “disinflation” turns into a dollar collapse people will be looking for anything that will hold value, and that certainly includes both the precious metals.


Remember there is no fever like gold fever, and that will ignite the silver market, as those looking to gold might be priced out of the market and, thus, willing to buy silver!


It is an honor to be,

David Morgan


Mr. Morgan has followed the silver market daily for more than thirty years. Much of his Web site,, is devoted to education about the precious metals. To receive full access to The Morgan Report click the hyperlink.

-- Posted 27 February, 2009 | | Discuss This Article - Comments:


Mr. Morgan publishes a private newsletter for serious precious metals investors. He hosts the web site: . He has been a private economist for over two decades his background in engineering , with an advanced degree in Economics/Finance. He has been interviewed on Don McAlvany's radio talk show, Financial Sense Newshour, Hard Money Watch, and appeared on television. Currently he does an internet radio wrap up each Friday discussing the economy and precious metals. Mr. Morgan was published in Global Investor regarding ten rules of silver investing. Currently, he is writing a book on silver.

Last Three Articles by David Morgan, Silver Investor

$75 Silver Looming
8 August, 2011

Silver and the Minimum Wage
4 March, 2011

David Morgan Explains Why Silver Is Catching Up, Why It's Broken Out and Where It Goes From Here
1 November, 2010

SilverInvestor's Archive List is presented to you by:

© 2003 - 2011, Silver Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.


The views contained here may not represent the views of, its affiliates or advertisers. makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of, is strictly prohibited. In no event shall or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.