Metals: Silver Looks Brighter

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For years, the U.S. Government has been working out ways and means of dealing with the probability that someday the Treasury would run out of silver. Despite that commendable foresight, Treasury was taken by surprise when the crisis arrived. Confronted by a sudden buying rush that threatened to wipe out its dwindling stockpile, the Treasury barely had time to put its plans into action. Sales of its silver for export were abruptly halted; domestic sales were limited to "legitimate industrial users," and the export or melting of silver coins was forbidden.* "We knew we'd get out of the silver business sooner or later," explains Assistant Treasury Secretary Robert Wallace, "but we didn't know it would be so soon."

That emergency action two weeks ago was aimed at forestalling a disruptive disappearance of the nation's remaining silver coinage before it could be fully replaced by coins of copper and nickel. Silver speculators, however, took the curbs as a signal that by year's end, when the Treasury expects to have sufficient "clad" coins available, it will stop holding down the domestic price of silver by selling it for $1.29 per oz. Next day, traders on Manhattan's Commodity Exchange bid up the price of silver to $1.67 per oz. Though the price of the metal for immediate delivery eased to $1.5085 by the end of last week, silver for May 1968 delivery rose as high as $1.60 before closing at $1.56.

Soaring Appetite. Abrupt as it was, the embargo was only the latest in a series of Treasury moves to cope with the soaring world appetite for silver. Because of increasing sales of sterling silverware and photographic film (in which silver halides are the light-sensitive ingredient) plus expanding use in electronics and aerospace, the demand for industrial silver jumped 91% (to 150 million oz.) last year in the U.S. Altogether, the free world consumed 464 million oz. of silver last year while mining less than half that amount. In 1963, to help balance supply and demand, the Government stopped issuing $1 bills redeemable in silver. Two years later it minted the first of its cupronickel dimes and quarters; last year it cut the silver content of newly issued half dollars from 90% to 40%.

Still, the Treasury's once vast hoard of the metal shrank by mid-May to a mere 485 million oz. (a quarter of its 1960 size) as the Government was forced to stick to its policy of selling silver at a low-pegged price. For if the price of silver rises above $1.40 per oz., it becomes theoretically profitable to melt silver dimes, quarters and pre-1966 half dollars for their metallic content.

To take the U.S. completely off the silver standard, Congress is speeding action on a bill that will allow the Treasury (after a one-year wait) to stop redeeming in silver the $553 million of old silver certificate bills that are still in circulation or hoarded away. That action would free 430 million oz. of Treasury silver now frozen by law as backing for the currency. Even so, the Wall Street brokerage firm of Paine, Webber, Jackson & Curtis recently predicted that the Treasury will run out of silver by mid-1968 (except for a strategic reserve).