Silver Prices Over the Last 100 Years & Inflation Adjustment

Inflation adjustment can change how we perceive historical silver prices. We explain why 1980 seems so high compared to today and what inflation adjustment has to do with it.

The History of Silver Prices

Looking at historical silver prices can be both fascinating and confusing. When viewing price charts that stretch far back in time, some years appear to have extreme peaks, while others seem barely noticeable. But what happens when prices are adjusted for inflation? Suddenly, the historical picture looks completely different!

What Does Inflation Adjustment Mean?

Inflation adjustment involves recalculating historical prices into today’s monetary value to account for the effects of inflation over time. This helps compare prices from different time periods in a fairer way.

Example:

• Without Inflation Adjustment: A silver price of $50 per ounce in 1980 appears as $50 in a price chart.
• With Inflation Adjustment: The same $50 from 1980 could be equivalent to approximately $170 in today’s money, depending on the inflation rate.

Silver price chart without inflation adjustment:

Silver price chart with inflation adjustment:

Image source: Macrotrends

Why Was the Silver Price So High in 1980?

In 1980, the silver price reached historic highs due to speculation and market manipulation by the famous Hunt brothers.

The price surged to almost $50 per ounce, which was an incredible amount at the time

However, without inflation adjustment, today’s price of around $25-30 per ounce may seem almost as high because charts don’t account for the reduced purchasing power of money since 1980.

Why Does 2011 Look Strongest Without Inflation Adjustment?

During the European debt crisis in 2011, silver prices rose to nearly $50 per ounce again, driven by economic uncertainty and increased investor interest. Since this occurred relatively recently, there’s no need for inflation adjustment to make the price appear high compared to historical data.

Why Does Today’s Silver Price Look Strong Compared to Previous Peaks?

Today’s silver price of around $25-30 per ounce may seem high when viewed at its nominal value. However, compared to 1980, when the inflation-adjusted price reached approximately $170, today’s price is far from its historical peak.

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When Should You Use Inflation Adjustment?

To better understand historical price charts, consider the following:

• Use inflation adjustment to compare prices fairly over time.
• View prices without inflation adjustment to see the actual prices at a specific point in time.
• Historical peaks: 1980 appears highest when inflation-adjusted, while 2011 looks strongest without it.

Understanding how inflation adjustment works can make a big difference when analysing historical commodity prices like silver.

Key Takeaways

Understanding the impact of inflation adjustment on historical silver prices offers valuable insights into the true value of this precious metal over time. Without inflation adjustment, historical peaks like those in 1980 and 2011 may appear similar in scale, but adjusting for inflation reveals just how significant the 1980 spike was in today’s monetary terms. While today’s silver price might seem strong in nominal terms, it pales in comparison to inflation-adjusted historical highs.

Whether you’re an investor, historian, or curious observer, recognising the role of inflation in shaping the narrative of silver prices can help you analyse the market more accurately and make better-informed decisions. Inflation adjustment isn’t just a technical exercise – it’s a critical tool for gaining a clearer perspective on the past and the present of silver prices.