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The Coinage Act of 1792 established the Mint of the United States, and made both gold and silver legal tender. This meant that anyone could present bullion at the Philadelphia Mint and receive it back, struck into coins. The 1792 act authorized six silver coins, in value from five cents to a dollar, and prescribed their weights and fineness. Making a dollar equal to given quantities of both gold and silver made the currency vulnerable to variations in the price of precious metals,[1][2] and U.S. coins flowed overseas for melting until adjustments were made to their size and weight in 1834[3] and again with the Coinage Act of 1853, when the amount of bullion in the silver coins worth less than a dollar was reduced. The fact that the dime (ten-cent piece), quarter dollar, and other smaller silver coinscontained less silver in proportion to the dollar helped keep them in circulation.[4]With the Coinage Act of 1873, the dollar was no longer equivalent to a set amount of silver,[5] a statutory change made so that as the price of silver dropped with increased U.S. production, mining companies could not present their bullion at the mints and receive it back, struck into silver dollars worth more as money than theywere as metal.[6] By the post-World War II era, the Bureau of the Mint was strikingthe three remaining precious metal coins, the dime, quarter and half dollar in 90 percent silverthe dollar had not been coined since 1935[7] and circulated little
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outside some Western states like Nevada and Montana.[8] The metal in a silver dollar was worth more as bullion than as money above $1.2929 per troy ounce; the smaller coins would be attractive for the melting pot above $1.38 per ounce.[9]Beginning in 1934, the price of silver in the United States was effectively set by the government as it would support that price through purchases and sales of the metal; in 1934 it was $.45 per troy ounce.[10] In 1958, with the return of lend-lease bullion, the Treasury's stock of silver reached 2.1 billion troy ounces; it began to vend the metal at $.91 per ounce to the public, despite the warnings of the Conference of Western Governors that there was not enough silver to make these sales and maintain coinage operations.[11]Worldwide consumption of silver more than doubled between 1957 and 1965, but production increased by only about 15 percent.[12] Industrial uses for silver included photographic film, batteries, and electronic components.[13] At the same time, the Mint's production of silver coin increased as it attempted to meet demand; it used 111.5 million troy ounces of silver in coinage in 1963, up from just over 38 million in 1958.[12] In spite of the increased demand, silver prices were checked by the fact that the Treasury would redeem silver certificates: paper money exchangeable for silver dollars (or the bullion equivalent, .7734 troy ounces), thus placing a ceiling of $1.29 per ounce on the market. Without government as the supplier of last resort, silver would rise in price, likely making it profitable to melt not only silver dollars, but the subsidiary silver coins as well. In 1963, the gap between production and consumption by the non-communist world amounted to 209 million ounces. Just lower than world production (210 million ounces), this gap was filled by the sale of Treasury silver at $1.29 per ounce.[14][15] Even a rise in the price of silver likely would not have led to a major jump in production, as silver was for the most part obtained as a by-product in the mining of other metals, such as copper and lead.[11]The Bureau of the Mint in 1955 ended coinage operations at the San Francisco Mint, deeming it cheaper to supply the West Coast with coins from Denver.[16] The Denver Mint (opened in 1906) had been modernized twice, in contrast to the aging Philadelphia Mint, constructed in 1901 and with much of its coinage equipment dating from then.[17] Plans for a replacement facility had been scuttled multiple times by political infighting, as a new mint was sought not only by different cities, but by various neighborhoods of the city of Philadelphia.[18]