The text below comes from someone I know in the industry, lets call them "InsideMan":
ONE SILVER PENNY (at the time of Offa in the 8th Century) = 22 ½ troy grains (1 grain = 64.8 milligrams) = circa 0.05 of a Troy ounce.
240 of these silver pennies used to equal ‘one pound of Sterling’ which is around 11 ¼ Troy ounces of silver. That is worth around £92 today. So the £1 at the time of Offa was currently 92 ‘new’ pounds.
Fast forward 900 odd years. In 1663 the guinea was introduced. I remember it well. 44 ½ guineas made 12 Troy ounces of gold (11/12 or 22 carat). It was originally meant to represent 20 shillings (one pound) but this lead to gold being accumulated at the expense of silver. In 1717, it was officially fixed at 21 shillings. This implied a gold/silver ratio of 44 times – much higher than in Continental Europe – with their currencies. This led to silver flowing out and gold flowing into the United Kingdom– the young Empire with silver lacking and gold in abundance was in a pickle. Foreigners would only accept gold at much lower prices (relative to silver) in payment. So surprise, surprise…
In 1816, it was decided that silver was not appropriate for the backing of the currency. Even though it had run parallel to the exponential growth of Western civilization from Greece the Renaissance and onwards to the industrial revolution. Silver was binned, and gold favoured – unlike everyone else on planet Earth.
1817 saw the gold sovereign introduced (valued at 20 shillings) containing 113 grains of 22 carat gold. One gold sovereign was equivalent to a pound, but a pound was now defined terms of gold. One pound in 1817 is equivalent to £150 today.
One C8th pound = Ninety two C21st pounds
One C19th pound = One hundred and fifty C21st pounds
A pound is not what it used to be. It is around 1/100 of what it used to be. When one compares the price of bullion to the price of other assets (like government stock, housing) it is even more undervalued. If only bullion could yield…